OANDA – US Close: A down week, but still just over a percentage point from record highs, Wall Street remembers, Apple ruling, Oil rebounds, Gold slides, Bitcoin pause
US stocks looked like they were going to finish on a high note, but the morning bounce was short-lived as selling pressure returned. Wall Street was grasping for reasons to be optimistic. Many traders’ minds were not on trading as America remembers the September 11 attacks. The 20th anniversary falls on Saturday, which will be filled with prayers, ceremonies, and solemn gestures around the world.
The S&P 500 index initially rallied on optimism Wall Street could see some constructive steps amongst the world’s two largest economies after Chinese President Xi and US President Biden spoke for the first time since February. Chinese tech stocks benefited the most as investors viewed dialogue between the two presidents as supportive for the global economic recovery and possibly some calm over the recent string of crackdowns from Beijing.
The focus quickly shifted from Biden/Xi to Apple’s defeat against Fortnite creator, Epic Games’ antitrust lawsuit. US District Judge Yvonne Gonzalez Rogers ruled that Apple has engaged in anticompetitive conduct that hurts consumers. The ruling was not a complete loss for Apple as the court did not find them as an antitrust monopolist in the submarket for mobile gaming transactions.
If this is the beginning of further lawsuits for Apple, this could unravel some investors, as Apple’s margins seem at risk. Despite the potential hit to Apple’s service revenues, investors will likely salivate if share prices produce a decent pullback.
Crude prices are rising on optimism Chinese demand is improving and that sweeping legislation could keep the oil market tight. The energy market is still digesting the Chinese crude intervention news and trying to figure out if the Biden/Xi call will lead to a more positive environment for risk appetite.
The crude supply outlook might keep the oil market tight as the House tries to deliver sweeping legislation that could cripple offshore drilling. While the House might support the legislation to address climate change, the Senate’s conservative democrats might balk at the bill.
Reports that OPEC will revise lower its 2022 oil demand growth forecast next Monday is why today’s rally ran out of steam.
WTI crude continues to respect the $70 level, but bullish momentum might not be too far away given the improving fundamental drivers.
Gold prices declined after US producer prices accelerated in August, sending Treasury yields sharply higher. Gold isn’t acting like an inflation hedge at the moment and will struggle to get its groove back until pricing pressures trigger risk aversion and boost demand for safe-havens. Gold needs to see strong demand for Treasuries send yields back down before investors get behind bullion again.
Gold’s struggles could extend into next week if the yield curve continues to steepen. Initial support remains the $1750 level, with $1700 likely being a level that would attract many long-term bets.
Bitcoin volatility will likely remain elevated as further regulatory oversight appears to be just around the corner. The Fed is expected to unveil a research paper this summer that explores a move to a central bank digital currency. The heavily anticipated Fed research paper could show how the Fed anticipates regulation to deliver a safer environment for the public in using cryptos and how to make payment systems more efficient. The SEC might also deliver new guidelines that could disrupt how crypto lenders behave and which products they can offer. Bitcoin prices are attempting to form a base after a crash was triggered on the first day El Salvador made it legal tender. If the floor gives, panic selling could lead to another massive drop.
This commentary was provided by Edward Moya Senior Market Analyst, The Americas, OANDA