Stocks embrace confidence data and earnings, Oil rallies, Gold wavers, Cryptos edge lower

US stocks are rallying after consumer confidence bounces back and on strong earnings by Nike and FedEx. The news was too good today and that has made the many Grinches on Wall Street tentatively throw in the towel.

Return of confidence

Today’s consumer confidence reading is a head scratcher for people expecting the economy to quickly fall into a recession.  The Conference Board’s confidence reading surged to 108.3, crushing the consensus estimate of 101.0, and hitting the highest level in 8 months.  Both the present situation and expectations readings improved significantly along with upward revisions to the prior month. 

The CB’s Senior Director of Economic Indicators Franco noted, “Inflation expectations retreated in December to their lowest level since September 2021, with recent declines in gas prices a major impetus.”  Consumer spending trends are expected to shift to services as big-ticket items cool further. 

The economy is still headed towards a recession, but the consumer continues to show signs of resilience which could delay a significant tumble for equities.  ​

Home Sales

The data continues to deteriorate in the housing market.  Existing home sales declined more than expected as surging borrowing costs and weaker consumer hold off home purchases. 

Fedex

Fedex shares are surging after the delivery giant posted the classic earnings beat and cost reduction announcement.  This quarter was quite the improvement from the prior one that raised concerns of weakening global demand ahead of the holiday season.  The results for both the top and bottom line were lower than a year ago, but an even further acceleration in cost savings is what is helping the share prices. 

During the earnings call, FedEx CFO Lenz noted that volume declines should moderate as they move through the rest of the year.  The worst appears to be over FedEx. 

Nike

Nike crushed this earnings season, inventories are improving, and their outlook going forward was rather upbeat.  The results from China are heading in the right direction as they’ve started to reopen.

Wall Street is liking Nike’s top and bottom-line beat, better-than-expected margins, and as inventories declined from last quarter.  North America sales are healthy and Chinese demand should improve going forward.  ​

Oil

Crude prices are rallying after stockpiles declined more than expected and as OPEC+ remains committed to keeping supplies tight.  The EIA report showed that crude, gasoline, and distillate demand improved from the prior week.  Gasoline inventories rose but that was somewhat to be expected as peak driving season is well behind us.  Production remained steady while imports tumbled.  As we approach peak holiday season, jet fuel demand has clearly returned, approaching the highest seasonal levels seen since 2017. 

The path of least resistance is clearly higher for oil prices and it should continue if China’s reopening doesn’t have major obstacles. 

Gold

Gold prices are ready to enter holiday mode as the bond market selloff has run out of steam.  Gold got a modest boost after falling inflation bolstered consumer confidence and pushed risky assets higher.  It looks like gold might struggle to get anywhere close to the $1850 level unless we see a fresh major catalyst. 

Cryptos

Bitcoin wavers as the cryptoverse watches the latest developments with the FTX collapse.  Sam Bankman-Fried has agreed to be extradited to the US and we may soon find out who else in FTX will be investigated and what other companies are impacted. Bitcoin isn't getting much of a boost from the positive risk-on environment that is running through Wall Street.