US stocks are declining as Wall Street abandons the tech trade ahead of massive tech earnings later this week and as global slowdown fears remain front and center as aggressive central bank tightening jitters won’t go away. Inflation won’t let up anytime soon as the Russian headlines suggest the war in Ukraine could see further escalations, which means inflation won’t ease up and that will continue to drive central bank tightening fears.
Earnings
The earnings blitz is beginning and overall it was not a good start. GE was down sharply as their full-year guidance was towards the low end. UPS saw lower volumes but still affirmed its guidance as they will pass on cost increases to the consumer. Pepsico posted strong results and raised its guidance, but shares were unable to shake off the risk-off theme hitting markets today. 3M showed sequential margin improvement but had a slow start to April and had to lower their outlook for the year.
The morning’s earnings picture showed price increases are weighing on businesses and costs are being passed onto the consumer. Alphabet will be the first major tech giant to report after the close, but it will be a tough quarter when compared to robust one last year. Everyone is expecting strong search and YouTube ads results, but the key to how share prices react might fall on the other revenue streams.
Oil
Oil is making a comeback as energy traders focus on tightness in the diesel markets and shift the focus back to Russian energy supplies and the rising danger of nuclear war in Ukraine. Earlier crude prices got a boost after China’s PBOC stepped up efforts to calm markets and as energy traders await China’s mass COVID testing results, which could lead to even more lockdowns.
The oil market has priced in enough demand destruction from China and crude prices should start to find strong support around the $100 level.
Gold
Gold prices are trying to find support here now that China’s PBOC is stepping up efforts to support the economy and as the move higher with yields continues to show signs of exhaustion. Gold investors are hoping prices can hold the $1900 level heading into next week’s FOMC decision, but if risk aversion remains the dominant theme that won’t happen.
Gold is trading more like a risky asset right now than as a safe-haven and that leaves it vulnerable here. If the war in Ukraine sees further escalations, that could be the catalyst to send prices sharply lower.
Crytpo
Bitcoin was tentatively back above the $40,000 level as Wall Street became more optimistic with the long-term outlook for cryptocurrencies after reports that Fidelity Investments will allow Bitcoin into 401(k)s. What also helped Bitcoin this morning is that the dollar rally is holding steady alongside Treasuries.
Bitcoin reversed lower as risk aversion returned to Wall Street, with tech stocks leading the decline. Russia’s suspension of gas supplies to Poland sent risky assets, including Bitcoin sharply lower.
Ethereum was showing signs of life hovering back above the $3000 level. Ethereum investors will become more aggressive with their bets if they feel more confident the upgrade to proof-of-stake system has less road bumps ahead. Ethereum also turned negative and will continue to follow what happens on Wall Street.