Market Drivers – US Session, Dec. 15

Mohamed Abdelhamid 16 December, 2023 2:43 am Commodities, Forex Market, Market Update

The price of WTI oil fell as low as $70.65 in the afternoon and then slightly increased to $72.00. This week, WTI might revert to the opening bids because of intricate technical issues and a danger prompted by the Fed’s dovishness. Global oil demand is declining more swiftly than OPEC’s ability to control production.

The US Dollar/JPY pair struggled to build momentum after the US Dollar’s drop against the Japanese Yen. In midweek, the Fed had a meeting with market participants to go over the outlook for a rate cut in 2024. From its current 5.5% reference rate, the Fed expects a median of three rate reductions, or 75 basis points.

Money markets, however, have outperformed the Fed in terms of policy positions; in 2024, six rate cuts totaling more than 150 basis points are priced in by swaps markets.

The gold market is recovering from a recent low after hitting an all-time high, with analysts predicting solid gains in February gold futures. Despite the market’s health, some analysts warn that gold prices may not break out next week due to thin trading conditions and the focus on the holidays.

Although the Fed has signaled three rate cuts next year, some analysts warn that markets are still too aggressive in pricing in interest rates.

In Friday’s market, key earnings movers included Costco Wholesale (COST) and homebuilder Lennar (LEN). COST stock raced nearly 3% higher after the company beat expectations for its fiscal first-quarter earnings and the retailer’s board declared a special $15 a share dividend. Lennar shares dived 5% in morning action.

After Friday’s opening bell, the Dow Jones Industrial Average fell 0.2%, while the S&P 500 lost 0.1%. And the tech-heavy Nasdaq composite climbed 0.4% in morning trades.

Among US exchange traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) moved up 0.3%, while the SPDR S&P 500 ETF (SPY) fell 0.2% early Friday.

The yield on the 10-year U.S. Treasury bond ticked further below the 4% mark, at 3.91% Friday morning. On Thursday, the benchmark tumbled to 3.93%, its lowest level since late July.

Economic Data

Three key reports came out Friday morning, mostly falling below projections: the Empire State manufacturing index, a purchasing managers’ index from S&P and the Federal Reserve’s industrial production report.

The Fed said industrial production increased 0.2% in November, slightly below the forecast for a 0.3% rise and up from October’s 0.6% drop.

Meanwhile, the December Empire State manufacturing index tumbled to -14.5, sharply below estimates for a fall to 3.7 after November’s 9.1 reading. That report came from the Federal Reserve Bank of New York.

Finally, the S&P Global U.S. Purchasing Managers’ Index for the manufacturing and services sectors also was released Friday. The manufacturing PMI fell to 48.2, below the 49.2 estimate, while the services PMI rose to 51.3, above estimates for a 50.6 reading.

Also Read:
Dollar consolidates before closing worst week since November