(Justin Vaughn, Editor, Options Trading Report)
Investors and traders were spooked by the late Thursday night strike by Israeli forces against Iran in retaliation for their missile attack. Oil shot up, then settled Friday, closing at $87.29. The Nasdaq Composite was off 5.5% for the week, while the S&P 500 was down 3.1%. The steady-eddy Dow Jones Industrial Average was up slightly for the week. “The magnificent seven lost plenty, over $950 billion in the last five days, taking the big hit on Friday,” according to Dow Jones Market Data, ”their largest weekly loss on record.”
After a ‘topsy-turvy’ week of a wandering market (up & down), Monday opened on an upswing, with nearly every sector finishing the day on the upside. All indices were positive all day, with the Dow Jones up 254 points, or 0.7%. The heavy-tech Nasdaq led the way up advancing 1.1% with the S&P 500 gaining 0.9%, up 5% for the year. Even the Russell 2000 (of smaller value companies) turned a negative previous week into a ‘trader’s dream’, with many of its value stocks coming alive. With hints of some resolve, the Israeli/Hamas conflict, and the settling of oil prices, the market turned its attention to upcoming earnings releases. A multitude of 1st quarter results due out this week, nearly 30% of S&P 500 corporations will release numbers, according to FactSet. “Earnings from the mega cap tech stocks could be more important than inflation data this week,” said Jay Hatfield, chief executive of Infrastructure Capital Advisors. Focus on Treasury yields is heightening with investors looking to safeguard capital and avoid potential losses. Yields have edged up as demand increases. Presently the 10-year Treasury yield is 4.622% up from 4.613% on Friday. With markets listless, with nervous investors, interest in treasuries mount.
Tuesday’s market was robust, with a strong volume and movement in all indices in nearly all sectors. Tesla talk flooded the market as released numbers were well below what was expected and deliveries below predictions. Mr. Musk talked of significantly reducing pricing to the $30,000 range and new innovations in merchandising to boast sales and production increases. As one the the most publicly held corporations, market interest and scrutiny is high. Wednesday’s market was ‘lukewarm’ while indexes were flat. Stocks wavered, as the moody market anxiously awaited upcoming earnings data due in the next two days. Several Mag-7 and other tech will be showing results Thursday and Friday. Bonds were stronger, edging up 6 basis points, landing at 4.65%, near a record high for 2024. “We’re living in a very bond-driven equity market today,” said Michael Kantrowitz of Piper-Sandler, chief investment strategist. Stocks plunged on Thursday’s opening with the Dow Jones sliding 600 points early, finishing down 375 points. The GDP (Gross Domestic Product), which is a good indicator of economic activity, and a good measure of the economic health of the nation was released Thursday. Early expectations of a 2.5% rate increase were missed, as it came at 1.6%, leaving questions about the Fed’s success in its previous rate increases.
Economists and currency traders alike were expecting a weaker dollar in 2024. With warring factions in the Middle East, the Russian/Ukraine war, several African skirmishes and pricey oil, near $90.00 a barrel, many commodity gurus were betting against the dollar, guessing the yuan, euro and yen would garner worldwide trading dominance. The Dollar, buoyed by a strong U.S. economy and a strong labor base, along with a consumer willing to pay ‘the price,’ has consistently stayed strong. Corporate America, the most successful producing nation in the world, supports the strongest currency in the world–the Dollar. According to the U.S. Dollar Index (which measures values of currency against major trade policies), the Dollar is up 5% in 2024. The Dollar is presently at a “34 year high against the yen.” Both the euro and Chinese Yuan are secondary financial players in the world trade markets.
RUMBLINGS ON THE STREET
Imaru Casanova, Portfolio Manager, Van Eck, Barron’s “Western investors are still on the sidelines. When these investors come back, that’s when the rally (in gold) will accelerate.” (“Gold historically responds to global events that threaten financial stability.”)
Eric Savity, “Tech Trader” writer, Barron’s “One thing that’s clear is that with AI, competitive lines are blurring. Cloud companies are now chip companies. Social-media sites look like search engines. Meta seems to be taking on Adobe, Google and Open AI all at once. The pace of change is breathtaking. And we’re just getting started.”
Marko Kolanovic, JPMorgan Chase strategist, Barron’s “Persisting inflation forces raise the risk that rates will need to stay higher for longer than expected. Inflation risks are also compounded by upside risks to oil due to geopolitical developments.”
Kathleen Brooks, XTB Research Director, WSJ “From a physical perspective nothing has changed for the oil price, and oil is still being pumped in the Middle East and is able to leave the region unhindered,” Ms. Brooks wrote in a note.