STATE OF THE MARKETS
Stocks wobbled ahead of the FOMC. US stocks closed lower on Tuesday after earnings from big names like Walmart (WMT), General Motor (GM) and UBS Group (UBS) missed estimates amid falling home sales and deteriorating consumer confidence. The tech-laden Nasdaq (-1.87%) fell the most, followed by S&P (-1.15%), Dow (-0.71) and Russell (-0.69%) as the Dollar index rebounded and closed above the 107 handle.
As at writing, yield inversions remain between the 1Y (3.08%), 2Y (3.50%), 5Y (2.89%), 10Y (2.79%) and the 30Y (3.02%).
In the commodities market, recession worries and SPR release pinned down crude below $94.75/bl after jumping above $98.20/bl. Gold was little changed as the metal continued to be bid above $1,720/oz amid fears of escalating tension and geopolitical risks in Europe. Elsewhere, iron ore continues to trade in a tight range of $105 – $106/tn as the commodity awaits new catalysts.
In the FX space, risk-off sentiments were evident as the safe haven Swiss seized the helm of demand in the short term while advancing further in the demand territories of the medium term accounts. Euro was sold-off across the board while demand for Aussie and Loonie seemed resilient across all horizons.
On Wednesday, markets expect to remain cautious ahead of the FOMC press conference while looking forward to seeing earning reports from Meta Platforms (META), Qualcomm (QCOM), T-Mobile (TMUS), Bristol-Myers Squibb (BMY), Boeing (BA), Automatic Data Processing (ADP), Lam Research (LRCX), Ford (F), General Dynamics (GD) and Humana (HUM) as well as the latest figures on US home sales and mortgage application index. EIA crude oil inventories will be in the spotlight for energy traders. FOMC Press Conference will commence at 2PM ET.
OUR PICK – No New Stock Pick
We stay on the sideline. Market is pricing for a 75 basis points hike and the 1Y (3.08%) is already yielding higher than the 30Y (3.02%) at writing. Bonds were also sold off in Europe as investors demanded higher returns and faster hikes from global central banks. Stocks may rebound in the short term and medium term but the long term outlook looks gloomy at this point.
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