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Strong retail sales buoy Wall Street with tech leading gains. Crypto pops

US consumer

US stocks finished higher amid positive economic data. The January retail sales rose 3% from a month ago, well above an estimated 1.9%, suggesting the spending power stayed strong despite sticky inflation. Nasdaq extended gains for the third straight trading day as the cheap tech shares seem to be still in favour of investors, while energy stocks slumped, which may indicate that investment funds continued to rotate from oil & gas producers to growth stocks, despite a further jump in rates. “Risk-on” could be the cause of the broad rally as the fear gauge, VIX slipped for the second trading day, down 3.6% to 18.23.

The US dollar regained strength as the US bond yields climbed higher following the hotter-than-expected CPI data. This sent all the other major G-10 currencies sharply lower, and gold slid to a one-month low.   

Asian markets are set to open higher after a broad selloff on Wednesday, with the ASX 200 futures up 0.49%, Nikkei 225 rising 0.66%, and Hang Seng Index up 0.19%.

Click to enlarge the table

  • 9 out of the 11 sectors in the S&P 500 finished higher, with Consumer Discretionary and Communication Services leading gains, both up more than 12%. Energy stocks lagged the broad performance, down 1.8%. The Healthcare sector also underperformed, falling 0.5%. Most of the big tech shares were up between 1-2%, but Microsoft and Meta Platforms were down 1% and 1.3%, respectively.
  • The US Treasury faces new risks of a debt default between July and September if Congress does not raise the $31.4 trillion debt limit, with final dates depending on tax revenues the IRS receives in April. Director the of Congressional Budget Office, Philip Swagel said “the extraordinary measures could be exhausted sooner, and Treasury could run out of funds before July”.
  • The British Pound tumbled as UK inflation cooled for the third straight month, strengthening the odds for the BOE to slow down its rate hikes in the next meeting. The UK’s headline CPI fell to 10.1% in January, followed by a 10.5% increase in December after a peak of 11.1% in October.
  • Gold futures slumped to a one-month low of 1,848 due to a strengthened US dollar and a jump in bond yields. The precious metal lost steam since 2 February when the Fed raised interest by 25 basis points and indicated more rate hikes to come.
  • Crude oil prices bounced off a session low and closed slightly lower falling 2%. Though the US crude inventory builds to a 17-month high, the resilient moves suggest that undersupply may be still a concern for traders amid improved demand outlooks due to positive US economic data, China’s reopening, and Russia’s output cuts. The re-rampant inflation could drive further hedging activities in oil trading.  
  • Cryptocurrencies spiked further as tech shares continued to rise, with both Bitcoin and Ethereum popping to their highest level seen on 2 February. Despite the recent mounting scrutiny proposal by the SEC, it seems to be difficult to make immediate amendments to crypto exchange custody programs. 

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