Oil prices surge to two-week winning streak as Iran supply fears grip markets
Stocks are finally moving in the right direction.
All the major indexes are moving up meaningfully this morning. The VIX has pulled back to 19, still an elevated level. Tech has finally caught a bid, even software. NVIDIA (NVDA) is leading, up 2.3%, taking semiconductors higher. A new concern about mega-tech is that their massive AI cap spending plans have greatly slowed down their usual robust share buyback programs, which may account for part of the weakness the shares have seen.
While there is certainly uncertainty as to the timing and magnitude of the return on investment of the huge buildout costs, one only has to see the volatility that has run through various sectors over concerns of the impact that AI will bring to see how powerful the implementation of AI is expected to be. The more knowledgeable people are of the AI applications that are coming, the more bullish they are on the efficiencies that will be realized.
Interest rates have ticked up today as we got positive economic data on industrial production and housing starts, reflecting a strong economy. The US 2-year yield is up 3bps to 3.47%, the 10-year +3pbs to 4.08%. Both are still near the lows for the year. Bets on the Fed rate cuts are unchanged, with no cuts likely until Powell leaves in May, then one quarter point cut in June and another cut in September as the leading bets. The US dollar index is stable at 97.3.
On the commodity front, precious metals are higher, especially silver, up 6.1%. albeit still down 14% in the trailing month. Gold is back over $5K. Crude oil is up 3% to $64.16/bbl (+8.9% in a month) on concerns over the conflict in Iran and an apparent breakdown in the Russia/Ukraine negotiations. Natural gas is down 2%, now down 14% in a month; gasoline is up 2.3%, up 9.5% in a month. Crypto is modestly higher with Bitcoin at $68.3K, still down 28% in a month.
International markets are strong across the board. It's interesting to note that emerging markets are leading YTD, +11.1%, and lead LTM +36%. The world ex-US is up 9.7% YTD and +32.5% LTM, strongly outpacing the US. Another vote for diversification. The trend remains positive, albeit with the S&P up less than 1% YTD and the NASDAQ down 1.6%, the new year is off to a weak start.