Stocks rise, mixed US data, FX, Netflix, pleasant weather takes down crude, gold consolidates

US stocks are higher after both energy price pressures eased and as big-tech rallies ahead of earnings.  Last week, earnings impressed with the banks provided optimism that the US consumer will be able to handle the recent pricing pressures hitting most industries.  It was a good day to be a mega-cap tech stock as Microsoft rose to fresh record highs, Netflix rallied ahead of earnings and Apple’s event on AirPods, MacBooks and new music plan were positively received.  

US Data

The US industrial/manufacturing slowdown in September was a lot greater than anyone anticipated.  Higher commodity prices, prolonged shutdowns in activity due to hurricane season, and the global chip shortage are having a greater impact on the economy.  The short-term problems still exist for industrial production, but the outlook is still bright for next year. 

The NAHB index of homebuilder activity suggested the hot housing market is not ready to cool.  Homebuilder sentiment climbed to a three-month high at 80, better than the consensus estimate of 75 and prior reading of 76.  Supply chain issues and labor shortage problems still are delaying completion times, but demand still remains strong . 

FX

The dollar is little changed on the day, with the euro and offshore yuan both rising 0.1%, while the Swedish krona fell over 0.5%.  The dollar will continue to take its cue from the direction of Treasury yields which currently want to signal immediate rate hikes after tapering is done in the middle of next year.   

Netflix

Netflix is still the king of streaming after over 130 million have watched Squid Game and Barclays downgraded Disney's stock.  A very violent South Korean show has become a global sensation that is dominating all social media platforms.  A Bloomberg story noted that Netflix hit has produced an estimated $891 million in impact value, as the stock has outperformed competitors since the September 17th streaming release.   Netflix reports on Tuesday after the close. 

Oil

Crude prices erased earlier gains as the global energy crisis won’t require added crude demand for the rest of October due to warmer weather.  The Commodity Weather Group anticipates that the US will have warmer-than-normal weather for the rest of October.  Oil prices have been skyrocketing on expectations that colder weather and a natural gas shortfall will lead to scrambling for alternative sources of energy, with crude being the preferred choice. 

A couple weeks of warm weather will not change the oil market deficit that is in place, but it will make it a little harder for Brent crude to hit the $90 level.  Crude prices could consolidate around the $80 level, with the $78 level providing modest support. 

Gold

Gold prices continue to reflect a tug of war between Fed rate hike expectations, with many traders becoming more confident an increase could come next summer.  Soft industrial and manufacturing data provided a little relief that rate hike expectations have shifted a bit too dramatically.  Gold could eventually see steady inflows once investors focus on the US excessive money supply and rising inflation. 

Gold saw some safe-haven flows after China’s economic growth slowed sharply. Risk appetite will struggle this week if earnings paint a picture of widespread supply-chain problems that will lead to significantly higher costs for the US consumer.  Globally central banks are all entering rate hiking cycles, which should help lead to dollar weakness.  Gold could be poised to consolidate between the $1750 and $1800 range until the Fed provides a clearer signal on tightening. 

Bitcoin

The cryptoverse is about to get a whole lot bigger now that the first US Bitcoin-linked ETF will launch on Tuesday.  Cryptocurrencies will now play a larger role on Wall Street and that has brought Bitcoin within striking distance of record high territory.  ETFs mean that this year Bitcoin interest could see several billions of dollars come under management which should keep the entire space buzzing.   

Initially, this new wave of traders will most likely only have the ability to go long these new ETFs, so a buy the rumor, sell the event reaction won’t likely happen.   Robust demand for Bitcoin ETFs is what is required to help Bitcoin break above the record high of $64,888.  If traders view the Bitcoin ETF performance as promising, short-term resistance might come from the $70,000 level.  Lackluster trading volumes for the new Bitcoin ETF(s) could trigger a selloff into bear market territory.