All Markets Red
On Friday, there was a sea of red on trading platforms as fear gripped global markets with stocks, global indices, and commodities all affected. One of the few markets in green was the Euro which traded nearly 1% higher against the US Dollar, reversing some of its recent declines.
The Dow fell over 900 points finishing down 2.53%, while the S&P500 closed down 2.27% from the previous close. All of November’s gains have been erased, and indices have returned to the buying support that formed during October. Thanksgiving week saw reduced trading hours and lighter volumes, perhaps exacerbating the fall following news of a new covid variation in South Africa.
It’s too early to say whether this is the start of a bear market, but investors looking for Black Friday discounts in the market should be cautious – bounces after a big fall generally don’t last.
In addition to renewed covid fears, investors have been spooked by news that several Fed policymakers indicated that a faster taper and earlier rate hikes are possible if inflation remains high. Newly released minutes from the Fed’s early November meeting revealed the hawkish news that policymakers agreed to reduce asset purchases.
Macro fundamentals are driving capital into the US Dollar at the moment; Investors have already priced in rate rises; The question isn’t if; it’s when and by how much.
Up until Friday’s rout, markets had been performing well; On Tuesday, Pioneer Natural Resources (PXD) soared 4.2%, breaching technical overhead resistance and rebounding from its 50-day line. Momentum remained on Wednesday when the stock climbed a further 1.2%.
After rising above 1.65% earlier this week, the yield on the benchmark 10-year Treasury note dipped nine basis points to 1.55%.
During the week, numerous positive economic figures were released, including higher-than-expected personal incomes and consumer expenditure for October, as well as the lowest level of initial unemployment claims since 1969. The Fed’s favored inflation index, Core PCE, remained elevated at 4.1 percent.
US Stock Market – Big Gains and Losses
Nvidia
Mid-week saw solid gains for growth stocks, and chip leaders Nvidia (NVDA) and Advanced Micro Devices (AMD) broke through to record highs.
The recent rally in Nvidia stock appears to be well-deserved since the chipmaker’s sales for the third quarter (which ended October 31) increased by 50% year over year to a record $7.1 billion, owing to record income in the gaming and data center sectors.
During the quarter, the company’s adjusted earnings increased by 60% year over year to $1.17 per share. According to analysts, Nvidia was expected to earn $1.11 per share on $6.83 billion in revenue.
Furthermore, Nvidia’s Q4 outlook suggests that its rapid growth will continue. The company predicts $7.4 billion in fourth-quarter revenue, up 48 percent year over year and considerably ahead of the $6.86 billion consensus projection.
Nordstrom
Nordstrom and Gap dropped 24% and 29%, respectively, after the two retailers posted disappointing quarterly results and warned of supply chain issues ahead of the critical holiday shopping season in the United States.
Nordstrom’s earnings missed analysts’ forecasts on Tuesday, as labor expenses ate into profitability and sales, and the company’s Nordstrom Rack segment failed to return to pre-pandemic levels.
The announcement sent the company’s stock down by more than 23% in the extended session. Nordstrom saw earning per share of 39 cents versus a projected 56 cents on $3.64 billion in revenue.
US Commodity Market
Oil
On Thursday, Thanksgiving saw a shorter trading day with many traders waiting to see how major producers would react to the US-led emergency oil release.
News that the US will add 1.1 million barrels per day (BPD) to the current oil market glut was a negative ripple to what was to follow during Friday’s session. Covid concerns triggered a tidal wave of selling, and both Brent and WTI oil fell by 10%, the most since April 2020 when pandemic fears initially emerged.
Gold
On Tuesday, Gold prices fell to a three-week low, as the US Federal Reserve Chair Jerome Powell’s re-nomination fueled speculation on quicker rate hikes, boosting the dollar and Treasury yields. Spot gold sank 1.2 percent to $1,787.22 per ounce, its lowest level since November 4.
Despite the fall and mixed signals in gold-related stocks, there are tentative signs of the start of a bull market in gold. By the end of the week, silver closed at $23.11 per ounce, platinum at $954, and palladium, the weakest, ended at $1,749.