US equities recorded their worst week since the year started.
Hawkish comments from many Federal Reserve (Fed) members hammers sentiment, as stress mounts before the much-important US CPI data due Tuesday.

If US inflation hasn’t eased, or eased enough, or God forbid, ticked unexpectedly higher on yearly basis, we could rapidly see the post-NFP optimism, and the pricing on the goldilocks scenario to leave its place to fear and chaos.

At the start of the week, the activity on Fed fund futures hints at around 91% chance for a 25bp in the next FOMC meeting, and around 9% chance for a 50bp hike.

In the FX, the US dollar index finally cleared the 50-DMA offers on Friday - which I think could be premature if tomorrow’s US inflation number is sufficiently soft.

A a wave of fresh buying in the Japanese yen also marked the latest mood in the currency markets, but didn’t last long.

The EURUSD, on the other hand, slipped below its own 50-DMA. What’s next depends on the US dollar, as the US dollar is what leads the dance right now.

In energy, US crude oil jumped past the $80pb on Friday, as Russia announced to cut its production by 500’000 barrels per day, which is roughly 5% of its daily production. But gains remain limited by an overall bearish mood and recession fears, and offers remain strong into the 100-DMA, which currently stands near $81pb level.

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US stocks failed to keep up with the European optimism on the back of rising bets that the Federal Reserve (Fed) could hike the interest rates to 6%.

In fact, option traders are piling into bets that the US rates could peak at 6%.

Plus, the surprise 50bp hike from Mexico’s Banxico, on the back of unexpected – and unwelcomed inflation jump since the end of last year, also raised worries that the US could experience a similar uptick in inflation, and, may have to raise rates higher.

And the strong US jobs market, the latest recovery in energy and commodity prices on the Chinese reopening optimism, and the sudden jump in second-hand car prices are red flags…

The S&P500 fell 0.88% yesterday, and Nasdaq retreated 0.90%. Topsellers will likely remain in charge of the market on the possibility that maybe inflation in the US may have not eased to 6.2% as expected by analysts.
But nothing is clear before next Tuesday’s CPI release, in terms of Fed expectations.

What’s interesting though, is that the hawkish Fed bets don’t translate fully into the US dollar valuation. The US dollar remains under pressure despite the positive pressure on the US yields. And the 50-DMA offers remain particularly solid in the US dollar index.

Finally, Bitcoin fell 5% on news that Kraken stops staking. Negative pressure in tech stocks could further weigh on appetite.

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US equities fell yesterday on the back of two important factors: hawkish comments from the Federal Reserve (Fed) members, and the unexpected surge in the American used car prices.

The S&P500 fell more than 1%, while Nasdaq slid around 1.80%.

Inside Nasdaq, Google had a particularly rough day, to say the least. The company posted a Tweet showing Bard in action, and the tweet went wrong, as Bard gave the wrong answer!

The stock price slumped by more than 9% at some point.

Microsoft on the other hand was upbeat on the news, and its valuation shortly surpassed the $2 trillion mark.

Elsewhere, Uber jumped more than 5.5% on stronger than expected results. Disney also jumped by more than 5% in the afterhours, after reporting better than expected results, and the promise to slash $5.5 billion in costs, along with 7000 jobs.

The US futures are in the positive at the time I am talking here, but the bears are not far away.

In the FX, the US dollar remains upbeat, but the 50-DMA offers remain a solid resistance to a bullish breakout. Likewise, the EURUSD remains bid at around the 50-DMA, and the dollar-yen remains offered into the 50-DMA. So that 50-DMA mark is the key resistance that must be cleared to set the dollar bulls free for further appreciation, and de-block the situation in the FX space.

In energy, US crude extended gains above its own 50-DMA yesterday. Could it extend gains higher, and by how much?

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Another hawkish speech from the Federal Reserve (Fed) Chair Jerome Powell turned into a risk rally yesterday. Equities gained, and the bond yields fell.

Yet, yesterday’s speech from the Fed Chair Powell was hawkish. He said that the Fed may hike the rates more than what’s priced in if the jobs market remains unexpectedly strong.

The S&P500 still eased when Powell said they need ‘substantial evidence’ that inflation slowed, but finally, the index erased gains and ended the session by 1.30% higher. Nasdaq jumped more than 2%. The US 2-year yield eased and the US dollar first jumped, then eased.

In individual stock news, Zoom jumped 10% on news that it will lay off 15% of its workforce, while Microsoft jumped 4% after the company unveiled its new ChatGPT-powered Bing!

The EURUSD tipped a toe below its latest bullish trend base, and below its 50-DMA yesterday, and the pair is just at the edge of bullish trend again this morning, with no guarantee that it won’t slide further.

Cable rebounded before hitting its 200-DMA, at 1.1950, and is back above the 1.20 mark this morning.

BP shares price jumped nearly 8% to above our mid-term 500p target, after reporting report profit, dividend raise and share buyback, while crude oil jumped more than 4% as API revealed a 2-mio-barrel decline in US stockpiles.

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Rising geopolitical tensions between the US versus China and Russia, and the hawkish Federal Reserve (Fed) expectations weighed on market sentiment at the start of the week. The US yields, the US dollar and gold gained, stock indices kicked off the week under selling pressure.

Fed President Jay Powell wills speak following a blowout jobs report, and US President Joe Biden will deliver his State of the Union speech following the Chinese spy balloon incident.

Hence, there is little to cheer.

The US 2-year yield is above the levels it kicked off the year, the US 10-year yield is following suit, and the dollar is sharply bid this week, the dollar index gained nearly 3% in three sessions.

Gold is slightly better bid on the mounting geopolitical tensions, but the rising US dollar and the rising yields will likely cap gains into the $1900 per ounce.

In the currencies markets, the EURUSD tanked to 1.0710 yesterday, the USDJPY jumped to 132, Cable consolidates a touch above the 1.20 mark, while the Aussie-dollar is better bid today as the Reserve Bank of Australia (RBA) hiked the rates by 25bp points as expected, and said that more rate hikes could be down the road, as inflation remains high and sticky.

In indices, the S&P500 retreated by 0.60% yesterday, Nasdaq 100 lost 0.87%.

In technology, Google announced its own conversational AI called Bard AI in response to the Microsoft-supported ChatGPT. Microsoft announced a mystery event where it could talk about ChatGPT, while Baidu announced that it will roll out its own AI in March jumped more than 15% in Hong Kong.

In energy and commodity space, the Indian Tata steel announced an unexpected loss last quarter and the shares slipped more than 4%. BP results were mixed.

Turkish construction stocks rose before the horrified eyes of those who were watching the earthquake news along with the market news, as more than 6000 buildings collapsed, killed thousands.

Crude oil rebounded past the $75pb.

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