Weekly News 2024/01/08-2024/01/12

 U.S. stocks closed mixed on Friday. The Dow Jones Industrial Average fell 118.04 points, or 0.31%, to 37592.98 points; the Nasdaq fell 2.57 points, or 0.02%, to 14972.76 points; the S&P 500 fell 3.59 points, or 0.08%. , reported 4783.83 points. All three major U.S. stock indexes recorded gains this week. The Dow rose 0.34% for the week, the Nasdaq rose 3.09%, and the S&P 500 rose 1.84%. The fourth earnings season for U.S. stocks has begun, and the market is evaluating the financial reports of large banks and paying attention to the development of tensions in the Middle East. The U.S. PPI in December was lower than expected, sending a positive signal of downward inflation.

U.S. stock investors paid close attention to geopolitical developments in the Middle East on Friday. Oil prices rose after the United States and Britain launched air strikes on Yemen's capital and other places. Sanaa, the capital of Yemen, and other places were attacked by US and British air strikes in the early morning of the 12th local time. U.S. President Biden and British Prime Minister Sunak confirmed that the U.S. and British troops had launched an attack on the Houthi armed forces in Yemen.

The government department reported on Thursday that the U.S. consumer price index (CPI) rose 0.3% month-on-month and 3.4% year-on-year in December, both higher than Wall Street's expectations and significantly higher than the Federal Reserve's 2% inflation target. However, the PPI is generally considered a better leading index for measuring inflation because it measures the channel prices companies receive for intermediate goods and services. The market also expects the Fed to cut interest rates five more times in the remaining three quarters of 2024, lowering the benchmark federal funds rate to a target range of 3.75%-4%.

 The fourth quarter earnings season for U.S. stocks has begun.

Delta Air Lines (NYSE: DAL) revenue in the fourth fiscal quarter was US$14.2 billion, an increase of 6% over the same period last year. Adjusted revenue was US$13.7 billion, a year-on-year increase of 11% and US$200 million higher than market expectations. Net profit was US$2.04 billion, or US$3.16 per share, compared with US$828 million, or US$1.29 per share, a year earlier.

It is understood that Delta Air Lines also announced a long-awaited order to purchase 20 A350-1000 aircraft from Airbus (EPA: AIR), which highlights the company's confidence in the continued strong strength of overseas travel. Deliveries will begin in 2026. The company has also signed an option to purchase an additional 20 wide-body models.

Bank of America's (NYSE: BAC) fourth quarter revenue was US$21.959 billion, market expectations were US$23.74 billion, compared with US$24.5 billion in the same period last year; net profit was US$2.838 billion, market expectations were US$4.525 billion, compared with US$6.904 billion in the same period last year.

BlackRocks (NYSE: BLK) revenue in the fourth fiscal quarter was US$4.63 billion, compared with US$4.34 billion in the same period last year, and market expectations were US$4.633 billion. BlackRock and Global Infrastructure Partners (GIP) jointly announced that the two parties have reached an agreement under which BlackRock will acquire GIP for a total price of US$3 billion in cash and approximately 12 million shares of BlackRock common stock.

Boeing (NYSE: BA) shares fell. The U.S. Federal Aviation Administration (FAA) said on Friday it will significantly strengthen oversight of Boeing Co.'s production and manufacturing and will conduct new audits of Boeing's 737-9 MAX production line and its suppliers.

 Bitcoin (BTC) fell below $42,000 on Friday, plunging nearly 10% as excitement over this weeks approval of a Bitcoin ETF gave way to a massive plunge. Bitcoin prices were as high as $46,000 earlier on Friday and soared to a two-year high of $49,000 on Thursday when the Bitcoin ETF began trading in the United States. But the exciting prices didn't last long.

The U.S. Securities and Exchange Commission (SEC) approved a spot Bitcoin exchange-traded fund (ETF) on January 10. However, many investors are finding that approval does not mean availability.

After years of speculation in the cryptocurrency industry, nearly a dozen spot Bitcoin ETFs received approval from U.S. regulators on Wednesday. The landmark decision triggered a surge in demand for spot Bitcoin ETFs. But even with regulatory approval, whether to offer trading in a spot Bitcoin ETF is still up to the companies themselves and some may be reluctant to get involved in this volatile asset class.

A spokesperson for Vanguard said in an email: “While we continue to evaluate our brokerage offers and evaluate new products entering the market, the spot Bitcoin ETF will not be available for purchase on the Vanguard platform. Our view is that these products are inconsistent with our focus on asset classes such as stocks, bonds and cash, which Vanguard Group views as balanced of a long-term investment portfolio.”

A Charles Schwab spokesperson said the company will offer cross-exchange trading of the Bitcoin ETF. James Kostulias, head of trading services at Charles Schwab, said: “There is a verification step for the actual underlying instrument and all the regulatory and strict requirements around ETFs.” Robinhood said that the company has begun to offer approved spot Bitcoin ETFs.

 Gold prices gathered bullish momentum on Friday and climbed to intraday highs above $2,060 an ounce. Gold prices rose ahead of the weekend as U.S. Treasury yields retreated as geopolitical tensions escalated following weak U.S. producer inflation data. Spot gold closed 1% at $2,049.04 per ounce. COMEX February gold futures closed 1.6% at $2,051.6 per ounce.

Gold prices rose sharply on Friday as tensions around the Red Sea stoked risk aversion as the United States and Britain retaliated against Houthi rebels for attacking American ships on Thursday. As a result, XAU/USD refreshed a five-day high near $2,062 per ounce. Traders bought gold as conflict in the Middle East escalated. On top of this, falling U.S. Treasury yields also boosted gold as bets grew that the Federal Reserve would begin sharp interest rate cuts in March.

The 2-year U.S. Treasury yield fell by about 10 basis points on the “US PPI data release day”, and the inversion in the 2/10-year yield narrowed to less than 20 basis points. In late trading, the U.S. 10-year benchmark Treasury bond yield fell 0.80 basis points to 3.9578%. The latest U.S. inflation report showed that prices paid by producers (PPI) were lower than expected, with PPI falling -0.1% on the month, missing expectations of 0.1%. On a year-over-year basis, PPI rose 1%, missing expectations of 1.9%.

Ole Hansen, head of commodity strategy at Saxo Bank, said that while it may be too early to see a breakout rebound, investors should not fight the bullish momentum. “The strong rejection of key support earlier this week has definitely reignited confidence in gold prices heading higher,” he said. “Gold is far from overextended, so if gold manages to break through $2,064 an ounce, were next May focus on $2,088 per ounce.”

 On Friday, the United States and Britain carried out air strikes and sea strikes against Houthi rebel targets in Yemen overnight after Iran attacked shipping, causing more and more oil tankers to be rerouted from the Red Sea. The supertanker Toya turned around before entering the Red Sea waters, tanker company Hafnia Shipping company TORM suspended all shipping through the southern Red Sea after halting all sailings. Oil prices rose 1% on Friday.

U.S. West Texas Intermediate crude oil futures gave up gains after hitting a 2024 high of $75.25 per barrel, closing $0.66 per barrel, or 0.92%, at $72.68 per barrel. Brent crude oil futures closed $0.88/barrel, or 1.1%, at $78.29/barrel. The intraday high rose by more than $3/barrel to over $80/barrel, the highest point this year.

Analysts and industry experts noted that while the rerouting is expected to increase the cost and time of oil shipments, supplies have not yet been affected, easing some of the previous price gains. For the week, Brent fell 0.5% and WTI fell 1.1%. Earlier this week, a sharp price cut by top exporter Saudi Arabia and an unexpected build in U.S. crude stockpiles stoked supply concerns.

Oil prices have also been supported by China buying record levels of crude in 2023 as demand recovers from the pandemic-induced slump, despite economic headwinds facing the world's largest energy consumer.

Despite higher consumer price inflation, investor confidence in the Federal Reserve's interest rate cut in March provided some support for oil prices. If the Fed cuts interest rates early, the U.S. dollar index will continue to face selling pressure as dollar bulls cannot rely on stronger inflation reports, tight labor market conditions to increase supply, which will also stimulate global oil demand and ultimately its price.

 On Friday, the 2-year Treasury yield fell to its lowest level since May as the U.S. producer price index unexpectedly fell, reinforcing bets that the Federal Reserve will cut interest rates this year.

Traders see about an 80% chance of the Fed cutting interest rates in March, up from 50% a week ago. Friday's economic data comes a day after U.S. consumer prices rose higher than expected, underscoring the bumpy road officials face in reducing inflation to their 2% target. As U.S. earnings season kicks off, investors are also scrutinizing results from big banks while keeping an eye on geopolitical developments ahead of Monday's Martin Luther King Jr. Day.

The dollar indexs bearish trend that started in October is being tested, and dollar sellers will have to step in near these levels if they want to maintain control, market analyst Fawad Razaqzada said. Zooming out a bit, the larger time frame shows that the U.S. Dollar Index has seen lower lows since peaking around 107.35 in October.

The importance of the key resistance zone between the 102.45 and 103.00 areas, which is where the USD currently stands, should not be underestimated. This area acted as strong support on several occasions in August and November 2023, but collapsed after the Fed's last policy meeting in mid-December.

If USD bulls regain control of this area over the next few sessions, the 200-day EMA could become the next upside target. But if the 102.45 to 103.00 area acts as resistance, this should keep the USD bearish bias in place. Therefore, markets will need to keep a close eye on today's close to determine the dollar's directional bias heading into the week ahead.

OnePro Special Analyst

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