US stocks finished higher to kick off the busy week ahead of the US key CPI data and the last FOMC meeting before year-end. However, both bond yields and the US dollar continued to climb following Friday’s moves amid stronger-than-expected November PPI data. While inflation-related commodity prices, such as oil and gas, sharply rebounded from a multi-week decline, metal prices, including gold, silver, and copper, all slipped due to a strengthened USD and re-rampant in the bond yields. Notably, the fear gauge, VIX jumped 9%, to 24.87, suggesting that risk-off sentiment mounts ahead of risky events this week. It seems the stock markets are pricing in another stubborn inflation data and a consistent soft tone from the Fed. Or the sector rotation is pointing to a stagflation economic cycle.
Chinese stock markets also lost steam on Monday as the infectious case number surged amid the government’s relaxation on Covid curbs. But the November new loan amount showed a sharp rebound from October, which may imply a swift economic recovery ahead.Click to enlarge the table
- Dow outperformed S&P 500 and Nasdaq, lifted by cyclical stocks. 11 sectors in the S&P 500 finished higher, with Energy and Technology leading broad market gains due to a jump in oil prices, up 2.4%. Technology stocks were also strong as most of the mega-cap tech giants were higher. Both Apple and Amazon shares rose 1.6%, and Microsoft was up 2.9%. Tesla shares fell 6% as investors may continue to be concerned about CEO Elon Musk’s financial state regarding his Twitter deal.
- Asian equity markets are set to open mixed. ASX futures were up 0.68%, Nikkei 225 futures advanced 0.65% and Hang Seng Index futures fell 0.41%. The Australian markets may benefit from the outperformance in the heavy-weighted energy, material and finance sectors in the US session.
- Gold futures showed weakness ahead of key inflation data, due to the strengthened US dollar. The bond yield-sensitive precious metal pulled back from key resistance of 1,800 at the 200-day moving average, approaching near-term support of 1,720.
- Crude oil prices rebounded as supply concerns may take over of traders’ focus ahead of the inflation data and the Fed decision this week. Oil markets are the most inflation-correlated commodity this year, risk-off trades may be the cause of such a rebound. The short covering may also attribute to the price action as the oil markets may have been oversold.
- Bitcoin was flat and stayed above 17,000 as traders may have lost plot amid the recent FTX disaster. Sam Bankman-Fried is confirmed as a witness for the FTX congress hearing. Ethereum was also slightly lower in the last 24 hours, trading just above 1,250.