Stock Market Today
Stock futures are trading on the positive side to kick start the week, while investors are considering taking a little pause after recording three consecutive winning weeks. One big question among investors and traders that continues to linger is if the current stock market rally is a bear market rally or if there is more to this. Traders aren’t buying the recent market rally story because of the message from the current earnings seasons. Pretty much every company warned about a recessionary environment taking place and taking a highly cautious approach in terms of hiring workers and keeping the headcounts steady.
Although the most important economic data for this month was released Friday – the US NFP- investors will see some significant economic numbers this week, which could make or break the current rally for the stock market. For instance, this week, we will see the consumer price index number for the US economy. Everyone will watch this data, hoping the reading will indicate that the US economy has reached its peak level in terms of inflation data. If the number confirms that, it could support the market rally as it could provide some comfort to the Fed while it aggressively tries to control inflation. However, if the number shows that there is still some room left for the CPI to reach its peak level, that could trigger another interest rate hike of 75 basis points from the Fed.
Gold prices are still struggling to attract bids, and the path of the least resistance seems skewed to the downside for the time being. The reason is that on Friday, the US NFP data confirmed that the US economy is faring well, and traders do not need to worry about a hard landing. The data was robust, and the number was solid, and this has increased the odds that the Fed will keep a hawkish monetary policy in place, proving to be a positive thing for the US dollar index. The strength in the dollar index is causing the gold price to move lower.
Traders have been hoping that the Fed will shift its gear from an ultra-hawkish monetary policy stance to a somewhat hawkish stance. However, the US NFP data has put cold water on those hopes as the Fed watches those numbers very closely. So overall, no good story can support a bull case for gold prices.
In terms of technical, the shinning metal is struggling to move higher above the 50-day SMA, a sign of weakness for price action. If we do not see the price moving above this average, it is possible that the path of the least resistance could remain skewed to the downside.
Oil prices have started the week on a positive note after suffering heavy losses during the last week. Traders have been worried about a possible recession in the US and other parts of the world due to the soaring inflation, central banks raising interest rates aggressively and weak economic numbers. But today, traders seem to be less concerned about all those factors and focus is more on the fundaments side, which is your supply and demand side. The fact is, in the past weeks, the message from OEPC has been clear that there is no need to expand their production increase as the supply and demand equation has entered a sweat spot, and it is possible that we could see the prices forming a consolidation zone here for a while.
It is also true that if there is no hard landing for the US economy and we only see a mild recession in the US—the world’s biggest economy, then there are even greater chances that the price may continue to trade its new range for a very long time. The new range for Brent oil prices isn’t above the $100 mark, but it could be near the $70 to $80 mark.
Stocks to watch
In terms of earnings seasons, we are definitely towards the tail end of this quarter, and most of the companies have been able to beat their expectations, but the outlook was a bit gloomy.
This week, it will be mainly about two major companies: Disney, which will report its numbers on Wednesday, and Coinbase, which will announce its earnings on Tuesday.