Thursday's Markets Update (January 18, 2024)

19 Jan 2024 by rate3

On Thursday, Stock indexes rose on volatility, with the Nasdaq-100 hitting ATH of 16,969, led by tech companies, amid ongoing market analysis of economic data and despite negative Fed commentary. Apple shares performed particularly well. Hawkish Fed signals and strong labor market data influenced Treasury yields and rate cut expectations. EU markets are up as overseas traders took cues from Wall Street. At the same time, the dollar, oil, and uranium are on the rise, "helped" by geopolitical risks.

Meanwhile, BTC surpassed silver in the ETF market. However, BTC and ETH are in a decline of over 2%, with Bitcoin preparing to test its important support zone at 41-40K, fueling speculation that it might repeat its plunge from January 2018 after the approval of the first BTC futures trades, which prompted many Wall Street players to start aggressively shorting Bitcoin.

Details

Jobless claims fell 16K to 187K (DOL), lowest since Sept'22 & below 207K forecast. Continuing claims fell 26K to 1.806M, lowest since Oct'23. Data shows tight labor market, allowing Fed to stay hawkish. Non-seasonally adjusted claims plunged 29,543 to 289,228, largely due to big NY drop (-17,176) in transportation, warehousing, construction & information.
Building permits rose 1.9% to 1.495M in Dec (Census Bureau), beating 1.48M forecast. Multi-unit rose 2.2% to 501K; single-family up 1.7% to 994K, highest since May'22. Permits rose in South (8.4% to 860K), Midwest (4.7% to 199K) & Northeast but dropped in West (-16.3% to 335K).
Philly Fed Business Conditions fell to -4 in Jan, lowest since May'23 & down from upwardly revised 12.6 (PhilFed). Average is 34.5 since 1968, with high of 91 in Sept'75 & low of -39.7 in Dec'73. At the same time, the Philadelphia Fed Manufacturing Index improved slightly in January 2024 to -10.6 from 12.8 in Dec 23 but remained negative for the 18th time in the past 20 months.

Crypto

BTC surpasses silver in the ETF market (source). BTC ETFs, gaining approval, outpaced silver ETFs, ranking second only to gold-focused ETFs. Grayscale Bitcoin Trust's conversion led to nearly USD 30B in BTC ETF assets, exceeding silver ETFs' USD 11B. Gold remains the top commodity with around USD 95B.
Tokenized US treasuries experience a remarkable 657% annual growth (source), reaching $863.6 million in market cap as of Jan. 18.

World Markets

Construction output in Euro Area fell 2.2% y/y EuroStat in Nov, sharpest since Feb'21 & worse than Oct's 0.7% drop. Shows impact of ECB tightening as appetite for big buys/projects fell. Building fell 2.4% vs Oct's 0.7% & civil engineering fell 1% vs Oct's 0.2%. Output fell 1% m/m.
Building plans approved in major South African cities fell 26.6% y/y in Nov (SA Statistics), the 5th straight drop. Non-residential & residential plans fell 41.6% & 28.1% respectively. Permits for additions/alterations fell 10%.

Commodities

Uranium prices hit $106 per pound, highest since 2007, due to supply setbacks and rising demand. Kazakhstan's production issues, Cameco's outlook downgrade, and Western shunning of Russian uranium contributed to the surge. Ambitious decarbonization goals, particularly in China and Japan, boosted demand.
Brent crude rose above $78 amid Middle East tensions and US strikes in Yemen. North Dakota oil output fell due to extreme cold. OPEC and IEA revised up global oil demand forecasts for 2025 and 2024, respectively.
Wheat futures dropped below $5.9 per bushel in January due to ample global supply. Favorable winter crop conditions in the US, upward revisions to global supply estimates, and strong harvests in major exporting countries contributed to the decline. Despite higher consumption estimates, expectations of large exports from Ukraine and Russia weighed on prices.

Currencies

Dollar index rose to 103.6 due to stronger economic data, signaling a less dovish Fed. Lower jobless claims and better-than-expected housing data boosted the dollar. Market expectations for a March rate cut decreased. Dollar gained the most against the Swiss franc and the Euro.