Superb tech earnings, congress impasse, profit taking on dollar bets, oil rebounds, gold mania

US stocks got a nice boost after Big-Tech delivered superb earnings results after the close.  Amazon crushed analyst expectations with a record profit. Facebook delivered impressive revenue results and noted July is looking strong despite growing boycotts.  Apple saw the pandemic help demand for several of its goods.  Alphabet had the weakest of results, but still came out ahead of analyst forecasts. 

This morning the mood was mixed with a plethora of earnings results.  Exxon had its worst quarterly loss in modern history, while Chevron’s results were the worst in three decades.  Merck had a strong earnings beat and raised their guidance. 

It seems the tech rally is not going away anytime soon and that could spell trouble for small-cap stocks.  The White House and Congress need to break their impasse with the virus relief bill or this will continue to drag down the recovery this quarter. 

FX

After a brutal trading week, the dollar is finishing on a positive as investors close out some very successful bearish bets.  After a big-tech delivered knockout results, risk appetite is being weighed down as Republicans and Democrats remain ‘far apart’ on stimulus talks. 

The dollar might stabilize today, but the fundamentals still strongly suggest it will remain a punching bag in the short-term.  Real yields continue to fall deeper into negative territory, Europe seems like they will have a better second half, and the Fed is likely going to telegraph more moves in September. 

Oil

Crude prices are rebounding after making a three-week low as global oil demand continues to struggle and as OPEC+ begins to ease production cuts.  WTI crude prices continue to hang around the $40 level since the consensus remains that the worst of the economic downturn is behind both the Americans and Europeans.  The global economic recovery is teetering but a persistently weaker dollar and the ability for OPEC+ to remain nimble regarding production cuts have provided a strong layer of support for oil prices. 

Important Chinese manufacturing data showed their recovery is still intact, however concerns remain that the data is plateauing.  The crude demand outlook will be dictated by the spread of the virus and in the short-term, it seems the US is getting a handle of the virus and that after a painful few more weeks, new cases, hospitalizations will all be trending lower.   

Oil prices seem poised for further consolidation, with WTI crude trading between the $38.50 and $42.50 region for the next week. 

Gold

Gold mania continues and after tentatively clearing the $2000 level, traders are starting to doubt whether a profit-taking pullback is in the cards.  Safe-haven demand remains strong as Congress and the White House continue to struggle to break the impasse on extending emergency unemployment benefits.  Gold will continue to shine bright as real yields continue to fall deeper into negative territory, virus surges will keep economic recoveries limited, and the stimulus trade will not go away until the labor market bounces strongly back.