Earnings season is continuing to lift stock markets this week, giving investors the reason they’ve craved to jump back in push equities back to record highs.
Downside risks to the economy remain but investors are opting to look beyond these as companies continue to give us plenty of reason to be optimistic about what lies ahead. The coming months will be challenging and this enthusiasm may come and go, creating plenty of two-way action in the markets, but right now investors are full of optimism.
Facebook earnings on Monday got the week underway for big tech earnings and, in keeping with the trend in the broader markets, the company managed to impress despite facing numerous challenges. Whether that be changes to Apple’s data rules, advertising headwinds as supply constraints weigh ahead of the holiday season, or political pressures following the whistleblower revelations.
Despite all of those challenges, the company continued to report strong user growth, revenues and profit. Their forecasts fell slightly short of analyst expectations for the fourth quarter as a result of Apple and advertising difficulties. Ultimately though, these are short-term problems that the company will adapt to, but it’s the metaverse that investors are really excited about.
Plenty more to come from big tech today, with Microsoft, Alphabet, and Twitter all reporting after the close this evening. Twitter’s share price has suffered this past week on the back of Snap and Facebook results and looks a little vulnerable ahead of its own release, with investors seemingly preparing for the worst.
Oil steady but rapidly losing momentum
Oil prices are pretty steady on Tuesday after once again being pushed higher at the start of the week on some cold weather headlines, something we should become accustomed to over the coming months. With OPEC+ clearly in no mood to pump more than is currently planned, the market is looking very tight and these huge moves in natural gas are going to lift oil prices as well.
While I suspect oil prices still have further to run to the upside in the coming months, especially if we are facing a cold winter period, it’s looking like a very overcrowded trade at this point and the rally is rapidly losing momentum. Barring more bullish headlines, which is possible considering what we saw yesterday, we could see some profit-taking in Brent and
WTI which would be healthy for the market.
China is currently recording cases of the Covid delta variant in 11 provinces, which may trigger some profit-taking in crude prices, given the country’s zero covid policy. Lockdowns in those areas with breakouts, despite the numbers being very small, could be enough to take some of the heat out of the oil market just as it’s losing momentum. Especially if those numbers tick higher and cases become more widespread.
Gold struggling after falling back below $1,800
Gold is once again struggling to hold above the $1,800 handle, with the price slipping more than 1% just as it appeared to take a significant step towards it. After giving up gains on Friday to close the week back below $1,800, the yellow metal rallied on Monday and ended the day back above, potentially setting it up to capitalize on the momentum and take a run at $1,833, a level it’s failed at repeatedly in recent months.
But it seems it isn’t to be, with gold sliding today and looking in bad shape despite the US dollar and yields being only marginally higher on the day. It doesn’t look good for gold which looks set to end the day below yesterday’s opening level, a negative technical setup that just compounds the red flag that appeared after Friday’s reversal.
A move below $1,780 and it starts to look really bad for gold, which has been in an upward trend throughout the month. This would break the trendline and potentially send it spiraling lower, with the next potential support appearing around $1,760.
Will Dorsey’s hyperinflation prophecy spur another Bitcoin surge?
Bitcoin is relatively flat on Tuesday after bouncing back strongly at the start of the week. Despite a brief dip below $60,000, it held onto that psychologically important support level and is now sitting comfortably above there, which begs the question, when will we see another run at record highs. There’s been lots of positive momentum in the market recently and there’s certainly no shortage of crypto headlines right now. And with Jack Dorsey’s warning of impending hyperinflation, perhaps we’ll soon see just how good an inflation hedge bitcoin truly is. Probably not, though.
