Markets ponder a Fed pivot

Stephen Innes SPI Asset Management

Markets

Peak Fed hawkishness and weak US growth data have helped US yields and the entire curve break below the recent ranges, driving growth stock outperformance as traders ponder a Fed Pivot.

And looking at the S&P 500 breaking through 4100, it seems like we are in a risk-on, dovish Fed and no US recession nirvana laced rally.

The global benchmark( SPX) has seen a robust 7% increase during the past two weeks. This period also coincides with the entirety of the 2Q earnings season thus far. And while I wouldn't go as far as suggesting that extraordinary earnings have pushed stocks higher, I think it is appropriate to say the market got a bit too bearish ahead of results, and we surpassed that bar.

But, of course, what is good for Main Street and what is good for Wall Street are not necessarily the same. Mainly because the financial markets, by their very nature, pull "the good times" forward, whereas the public lives the gloom of recessionary doom in real-time.

Oil

The choppy and often directionless price action of late is a stark reminder of speculators' role in the market.

Still, nowhere better to view the disconnect between Main Street and Wall Street this day is in the energy space. While anticipatory assets ( stocks) are rallying hard on hopes of a Fed pivot, prompt Oil prices are struggling due to negative macro data. Most driving-age adults are tightening purse stings as they live in economic slowdown gloom in real-time.

Despite the softer Fed tone, which should eventually support growth, it still seems like traders need little justification to pare bullish bets against a generally gloomy economic backdrop and the threat of a protracted economic slowdown.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

AUD/USD defies Iran war jitters as RBA hike bets double

The Australian Dollar rallies for the fourth straight day against the US Dollar as market mood remains positive amid high tensions in the Middle East, pointing to a resumption of hostilities, as reported by recent news. Despite this, the AUD/USD trades at 0.7027, up 0.44%.

USD/JPY remains confined in a familiar range below 158.50

USD/JPY sees some dip-buying in the Asian session on Wednesday, though it remains confined within a multi-week range near 158.50 as the uncertainty over the timing of the next BoJ rate hike keeps Japanese Yen bulls on the defensive. Meanwhile, hawkish Fed expectations, bolstered by inflation risks stemming from volatile oil prices, underpin the US Dollar. However, looming intervention fears could limit JPY losses and cap the currency pair.

Gold advances modestly; targets $4,150

Gold prices manage to reverse three consecutive daily declines, trading just below the $4,150 mark per troy ounce on Wednesday. The precious metal’s recovery comes amid a slight drop in the US Dollar, mixed US Treasury yields across the board and a widespread cautious tone from the US-Iran front.

Dogecoin Labs launches, resistance looms

Dogecoin (DOGE) Labs launched Wednesday in partnership with the Dogecoin Foundation, bringing together several product teams and technologies to expand the use of the memecoin (DOGE) across payments, decentralized finance (DeFi) and consumer applications. The launch will consolidate MyDoge, DogeOS and Such App under one business, led by Jordan Jefferson, founder of MyDoge and DogeOS.

What the midterm elections mean for Treasury yields, the Dollar and Gold

Democrats are priced to take the House, so November 3 comes down to the Senate and how much Washington can borrow without the other party. Treasury yields will show the answer first, then the Dollar and Gold. On November 3, Americans vote for all 435 House seats and 35 Senate seats. For bond prices, the result comes down to one thing: how much the government will borrow over the next two years.

The US Dollar fell. Gold didn't rally. That tells you everything

Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.