US Close: Stocks lower as yields pop, Strong earnings from both Netflix and Procter & Gamble, Oil rebounds, Gold beating continues, Bitcoin holds $19k

US stocks are weakening as the bond market selloff is picking up again after further signs the Fed is going to remain hawkish.  The Fed’s Kashkari said he doesn’t see them stopping raising rate at 4.50-4.75% if they are not making progress with core CPI.  He also noted that he sees little evidence the labor market is softening and that they don’t see any evidence that core inflation has peaked. Markets expect the Fed to deliver another 75 basis point increase in November and the odds are rising that they could do that again in December.  

Strong earnings could not keep the rally on Wall Street going as a strong economy still suggests the Fed can remain aggressive with tightening. 

Netflix

Netflix snapped its subscriber growth losing strength and added 2.4 million new viewers last quarter.  Netflix is making a nice comeback and its new ad-supported tier strategy could provide the key to the next wave of profit-growth.  The quarterly report was basically all good news as third-quarter revenue came in at $7.93 billion, above the $7.85 billion analyst estimate and EPS posted at $3.10, almost a dollar above expectations.  Fourth quarter guidance was a little soft, but Netflix shares only cared about the 2.4 million subscribers number as that came more than twice the estimate of 1 million subscribers. 

Procter & Gamble

Procter & Gamble delivered strong earnings that saw decent beats across the board.  Core EPS delivered a 2-cent beat, but organic sales across grooming, beauty, and baby, feminine, & family sales beat, while  health care organic sales missed.  The FX impact story is going to become a bigger deal next earnings season and Procter & Gamble is expecting a large blow. 

Oil

The White House goes all-in on sending oil prices lower over the short-term.  The Biden administration will release an additional 15 million from the Strategic Petroleum Reserves (SPR) and will keep the door open to releasing more if oil prices remain elevated. The White House plans on replenishing the heavily tapped strategic reserves when WTI crude is at or below the $67 to $72 per barrel range. The strategy is a smart one oil as it should keep a cap on prices and incentivize the oil giants to increase production a little bit.

Energy traders might not put a lot of weight from the initial comments from oil executives, but they will closely listen to both Exxon and Chevron’s earnings call on October 28^th.  The oil giants will update their CAPEX plans and we might get a better understanding if they will appease the White House and deliver more output over the next year despite all the global recessionary fears. 

Crude prices initially pared losses after the EIA crude oil inventory report posted a surprise draw. Oil pushed higher after President Biden’s comments on energy and plea to oil companies.

Gold

Gold bulls keep licking their wounds as the king dollar trade won’t go away.  Gold ETF purchases are not gaining any interest and weakening outlooks across China and India will weaken the normally attractive time to buy gold at the beginning of the new year. 

The bond market still tells gold where it is going and with Treasury yields making a strong move higher, non-interest bearing gold is in trouble.  If gold breaks below the $1620 level, it could get even uglier for gold.  The psychological $1600 level might not prove too strong of a support level for gold, which could lead to a plunge to the $1550 level. 

Cryptos

Cryptos remain grounded as a major move in yields is powering the strong dollar trade. Bitcoin continues to hold the $19,000 level despite a solid move higher with yields.  Bitcoin resilience has been impressive, but will likely get tested over these next few weeks.

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