OPEC says enough

Last week ended with slowing appetite after the Federal Reserve (Fed) cast doubt on another 25bp cut in December and Big Tech earnings failed to impress investors despite beating lofty expectations. But nearly two-thirds of S&P 500 companies have already reported earnings, showing more than 10% year-on-year growth — higher than analysts had expected and marking the fourth consecutive quarter of double-digit earnings growth, according to FactSet. Despite the hectic week, the S&P500 still closed up about 0.71%, while the Nasdaq 100 extended gains by 2% to a fresh high.

The energy sector, in particular, ended the week on a stronger note after Exxon and Chevron reported earnings on Friday. Both companies beat expectations, driven mainly by solid production growth and operational execution despite headwinds from lower oil prices. Exxon leaned heavily into growth (Guyana/Permian) and raised its dividend, while Chevron’s more conservative focus on cash flow, share buybacks, and dividends — combined with the Hess deal — resonated well with investors. SPDR’s energy fund — which tanked after the April tariff announcement, then regained pre-announcement levels before falling again in September — has managed to hold support near a critical Fibonacci retracement level. It tested the 50-DMA to the upside but failed to close above that mark as concerns about the low-price environment kept bulls from extending their bets.

US crude found buyers near the $60 pb level last week, keeping prices above pre-sanction levels, though the 50-DMA continues to cap the topside amid ample supply from OPEC and the Americas and uncertain global demand. The Paris-based IEA projects that global oil supply will rise by around 3 mbpd this quarter and reach a record glut next year. Perhaps in response, OPEC announced over the weekend that it will halt additional supply between January and March, following a 137 K bpd increase in December. That decision helped US crude start the week on a positive note, though bulls still look hesitant to break key technical levels. The $62–$62.15 pb range — which includes the minor 23.6% Fibonacci retracement of the June–October slump and the 50-DMA — will likely remain a tough ceiling for now. That stands in interesting contrast to clean-energy funds, which have performed well since the April dip despite the White House’s pushback against alternative energy sources. VanEck’s Global Clean Energy ETF has jumped more than 60% since April and still trades at a 24% discount to its 2022 peak.

In the medium run, AI-related electricity demand should continue to boost appetite for energy providers — traditional, alternative, and nuclear alike. AI demand is expected to add hundreds of terawatt-hours of consumption over the next decade, on top of growing demand from emerging markets. Energy remains an intriguing play — regardless of which type of energy you prefer or support financing.

Speaking of AI, another week begins with strong appetite for AI-related stocks. Korean tech names are leading gains this Monday morning after Nvidia announced late last week — as promised earlier — that it would supply over 260’000 chips to South Korea’s government and leading firms, including Samsung Electronics and SK Group. The deal is estimated to be worth between $8 billion and $12 billion for GPU supply alone. Samsung is up more than 3% this morning, SK Hynix more than 10%. Even Korean chicken-related companies got a boost after Jensen Huang was spotted eating chicken with Hyundai and Samsung executives. Nasdaq futures, meanwhile, are trading higher and leading gains into the European open. Voila.

This week, in the continued absence of US data due to the ongoing government shutdown — which, by Thursday, will become the longest in history — investors will keep their focus on earnings. In tech, Palantir and AMD (which recently announced deals with Nvidia) and Qualcomm (which just revealed plans to enter the AI-chip market to compete with Nvidia) will head to the earnings confessionals. McDonald’s and Shopify, meanwhile, will help investors gauge US consumer dynamics as concerns rise over consumer health amid perceived weakness in the jobs market and early cracks in housing.

The US Dollar remains relatively strong despite the underlying noise. A more hawkish Fed outlook last week helped the greenback recover part of this year’s losses, but its rebound also reflects heavy sell-offs in two major peers: the Japanese yen and the pound sterling. The yen weakened on expectations that Takaichi will support continued easy monetary policy, while sterling came under pressure on budget concerns ahead of the Autumn Statement and growing odds that the Bank of England (BoE) may need to intervene sooner rather than later to prevent a deeper economic downturn.

The BoE meets this week and is expected to leave rates unchanged, but there’s now a growing chorus suggesting the bank could deliver a surprise cut — or at least sound dovish enough to confirm Cable’s medium-term bearish trend below the critical 1.3140 Fibonacci level.