Fed Gets More Hawkish | 24 February 2023

#SP500:

Stronger-than-expected reports on employment, retail sales and inflation have pushed up expectations for how much higher the Federal Reserve will need to raise rates and ignited a surge in Treasury yields - typically a negative development for stocks. Yet the robust data has also dispelled fears of an impending recession that plagued Wall Street at the end of 2022, giving investors a reason to hold on to equities, at least for now. The S&P 500 is up 6% for the year-to-date, even as benchmark 10-year Treasury yields have risen nearly 50 basis points from their lows of the year. Meanwhile, stocks are getting strong support from retail investors, who pumped a record net average of $1.51 billion per day into U.S. stocks over the last month.

Trading recommendation: buy 4040 and take profit 4187.

XAUUSD:

While inflation data are showcasing a broadening in US price pressures, it’s too soon to argue for the Federal Reserve to re-accelerate its pace of interest-rate hikes next month. On the one hand, “the Fed’s been trying to put the brakes on, and it doesn’t look like the brakes are getting much traction,” Summers said. But on the other, there’s the potential for a sudden stop in the economy, when companies reckon with a build-up of inventories and headcount on their payrolls, and consumers deplete their savings. Interest-rate futures suggest Chair Jerome Powell and his colleagues will host the key rate by a quarter percentage point in March and May, and odds favoring a final quarter-point move in June. This is a negative signal for gold.

Trading recommendation: sell 1887 and take profit 1870.

#WTI:

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman is adamant that the current OPEC+ output targets, set in October, will remain in place until the end of the year. That shouldn’t come as any great surprise. After the financial crisis of 2008, for example, OPEC agreed on a collective output target of 24.845 million barrels a day. That figure remained unchanged for three years and was only revised after then-Saudi Energy Minister Ali al-Naimi emerged fuming from what he described as the worst-ever OPEC meeting in June 2011. This is a positive signal for oil prices.

Trading recommendation: buy 76.29 and take profit 80.00.