Up and down, turn around

Social media companies were hit hard yesterday, as Snap dropped more than 43% in yesterday’s session alone, and is down by 85% since its last September peak. Other companies that make money with digital advertising fell along with Snap. Facebook lost 7%, Alphabet lost almost 5%, Twitter more than 5.50% and Pinterest more than 23%!  

One of the rare companies that rebounded was Zoom, its shares jumped more than 5% after reporting a better-than-expected sales forecast beat.  

But zooming out, the social media plunge pulled Nasdaq lower yesterday, as the technology-heavy index slid more than 2%, as the S&P500 lost 0.81%, while the Dow eked out a tiny 0.15%. 

Fresh earnings from retailers were mixed. Abercrombie took a hit after downgrading its sales outlook, leading to a nearly 30% plunge at yesterday’s session, Best Buy cut its guidance, though the new guidance was still better than the Wall Street estimates – which certainly helped saving the day for Best Buy, while Nordstrom rose its full-year forecast, as the company predicted shoppers will continue to shop despite higher prices. 

Overall, the US equity futures are in the positive again, hinting that we may see another positive attempt, in the middle of a storm. 

US yields ease 

Good news is that we see a further easing in the US 10-year yield, hinting that a significant rise above the 3% level is not on the cards for now.  That’s relatively good news, and could help the downside pressure in risk assets ease, but not stop.  

As long as the positive pressure on food and energy prices remain, the inflation worries will stick around, and the energy stocks will continue providing a solid hedge to portfolios.  

On Tuesday, the US energy stocks outperformed their peers; Exxon Mobil and Chevron rose, Occidental Petroleum eased (but only around 0.50%), while in the UK, BP and Shell were softer but the British oil giants remain on a very strong positive trend, suggesting that the price pullbacks offer interesting dip-buying opportunities rather than a cause for concern. 

Gold gains on softer yields 

Gold extended gains to $1870 per ounce, and the softer US yields hint that we may see further gains in the precious metal, especially when the predictability in the equity markets remains poor and drives cash into safe haven assets. 

The Dollar Index eased below the 102 mark

The EURUSD extended gains to 1.0750. After Christine Lagarde’s blog post on Monday, which called the end of the negative rate era in Europe as soon as in the third quarter, we could start seeing the price pullbacks in euro as interesting opportunities to build fresh long positions aiming a further recovery toward the 1.10 mark against the greenback.  

Released yesterday, the flash PMI data came in weaker than expected in the Eurozone, hinting that high energy prices and the war took a bigger toll on the European economic activity than what the analysts predicted. But the price stability is the primary goal of the European Central Bank (ECB), and the ECB must address the rising inflation problem, before it addresses the slower economic growth. 

RBNZ raises OCR to 2%, points at 3.95% for Q3, 2023 

The Reserve Bank of New Zealand (RBNZ) raised its official cash rate to 2% as expected at today’s monetary policy meeting, and released a more hawkish than expected accompanying statement, saying that the OCR will continue lifting the rates ‘at pace to a level that will confidently bring back consumer price inflation to within the target range’, and the stable inflation expectations will be taken as a key indicator that the policy is working. The RBNZ projected that the cash rate will peak to 3.95% in the third quarter of next year. That’s almost the double of today’s 2% level. The kiwi extended gains to around 65 cents against the US dollar, and is one of the most promising major currencies in the coming months.