Oil prices surge to two-week winning streak as Iran supply fears grip markets
Another big week for earnings. Commodity volatility remains high.
US stocks are up solidly this morning after a volatile futures market over the weekend. Today we’re seeing the Korean Kospi down 5.2%, the Shanghai market down 2.5%, while the UK FTSE 100 is up 1% and the German DAX is up 1.2%. Market volatility is rising. For January, the S&P was +0.6%, the NASDAQ +0.2%, the Dow +1.1%, the Russell 200 +4.4%, the even-weighted S&P +2.6%, and the Magnificent 7 -0.6%. A positive and volatile month, where mega tech lost the leadership, but at the same time, semiconductors were up over 6%.
Commodities have been very volatile, with the silver market collapsing on Friday, down over 25% in a day, the worst day on record, yet was still up over 8% for the month. Gold was down as well, down over $1,000 below its record price earlier in the week, but also up over 8% in a month. Copper is down over 11% from its high last week, up only a little over 1% for the month. Other metals are also seeing above-average volatility. Crude oil is down 4.8% today to $62/bbl as fears of a conflict with Iran have cooled for the moment. Natural gas for March is back down to $3.42/mcf, down 2.5% for the month. Crypto had its own meltdown, falling to $78.7K, down 12.3% for the month.
Interest rates are on the rise, with the US 2-year up 4bps to 3.57%, the 10-year up 3bps to 4.28%. International yields are higher as well. One concern is that Kevin Warsh, Trump’s candidate for the Fed chair, has a stated belief that the Fed’s balance sheet is much too large, and even if he cuts the overnight Fed Fund rates, he will let the balance sheet run off, or may actively sell positions, which will put pressure on longer-term rates.
On the earnings front, Disney (DIS) reported beats top and bottom, but the stock nevertheless is down 5.5% (-6.4% YTD, -6.4% LTM), perhaps on concerns that CEO Bob Iger plans to step down early. Tonight, we get Palantir (PLTR), tomorrow AMD (AMD), Merck (MRK), and PepsiCo (PEP), Wednesday Alphabet (GOOG), and Eli Lilly (LLY), and Amazon (AMZN) on Thursday. So far, earnings growth is outpacing forecasts, +11% vs 9%.
As the trading day rolls on, the major stock indexes are near their highs for the day, with the Russell back in the lead +1.3% and the even-weighted S&P not far behind the market weight. Tech is in the lead, helped by semiconductors, with only energy, utilities, and real estate in the red. Precious metals continue to fall, as do energy prices. The VIX is modestly lower at 16.8. With the S&P back to only 30 points from 7,000, the trend remains positive.