【Market Morning】Gold retreats on dollar rally, Nasdaq stocks continue to struggle, Oil prices end lower
Oil prices end lower as U.S. crude supplies mark first increase in 8 weeks;Gold price fall to their lowest settlement in about 6 months; Nasdaq stocks continue to struggle, but Dow adds 90 points on Wednesday.

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Gold price fall to their lowest settlement in about 6 months
Spot gold price declined on Wednesday for a second session in a row, with a climb in the U.S. dollar index to its highest levels in a year sending prices for the precious metal to their lowest finish since late March.
Spot gold lost $14.60, or 0.8%, to settle at $1,722.90 an ounce, Spot silver dropped 98 cents, or 4.4%, to $21.485 an ounce.
“The precious metal is likely to weaken further amid a stronger dollar,” said Lukman Otunuga, manager, market analysis at FXTM. However, it’s outlook may be influenced by the Federal Reserve’s “preferred inflation gauge,” the core personal consumption expenditures price index, due out Friday, he said.
So far, the central bank has admitted to “continued inflationary pressures,” which is supporting its tapering narrative, David Russell, director of marketing at GoldCore, told MarketWatch. “Moving the tapering up in the schedule or even the increase in the tapering narrative has kept gold and silver relatively capped to the upside and vulnerable still to the downside in the short term.”
“Further downside in metals can be expected short term if either the taper-talk increases or the stock markets react negatively to same,” said Russell.
On the other hand, a realization that the Fed has “painted itself in to a corner and, in reality, has little scope for any sort of a meaningful taper will see gold and silver break to the upside once again,” he said.
“Gold and silver prices have been hit by a new rebound of the U.S. dollar and by the rise of the 10-year yields,” wrote Carlo Alberto De Casa, analyst at Kinesis Money, in a daily note.
On Tuesday, gold and other precious metals, which don’t offer a coupon, were under pressure as the benchmark 10-year Treasury yield rose to the highest since June 25 and the 30-year long bond hit its highest yield since July 1, according to data compiled by Dow Jones Market Data. Bonds compete against gold for safe-haven demand and higher yields can undercut the comparative appeal of the precious metal.
Dollar advances to one-year high; U.S. debt ceiling impact muted
The dollar surged on Wednesday to a one-year high against major currencies, boosted by increased expectations for a reduction in the U.S. Federal Reserve’s asset purchases starting in November and an interest rate hike, possibly in late 2022.
The greenback also fared well despite an impasse in Washington over the U.S. debt ceiling that threatened to plunge the government into a shutdown.
The world’s largest reserve currency, seen as a safe-haven bet at times of market stress, has strengthened in recent days as investors instead focused on fears of a global slowdown, a rise in energy prices and higher U.S. Treasury yields.
Traders are also concerned the Fed will start to withdraw policy support just as global growth slows.
“Fed has sounded the starting gun on monetary policy normalization,” wrote Kit Juckes, macro strategist, at Societe Generale in his latest research note.
“As the U.S. escapes the interest rate zero-bound, leaving the Eurozone and Japan behind, the global savings glut is set to be drawn towards the dollar, which can outperform the majority of other currencies in the coming year, and may start its move earlier than we expected,” he added.
The US dollar index - which measures the U.S. currency against a basket of six major currencies - rose for the fourth consecutive day, to 94.112, its highest since early November last year. It was last up 0.4% at 94.115.
The euro was among the currencies to lose ground, falling below the $1.16 level , the lowest since late July 2020. It last traded down 0.7% at $1.1596.
The yen showed little reaction to the election of Fumio Kishida as leader of Japan’s ruling Liberal Democratic Party, which put him on course to become the country’s next prime minister.
The yen, the currency most sensitive to U.S. yields as higher rates can attract flows from Japan, touched an 18-month low against a resurgent dollar. The dollar climbed as high as 112.04, its strongest level since late February last year, and was last up 0.4% at 111.99 yen.
Oil prices end lower as U.S. crude supplies mark first increase in 8 weeks
Crude oil prices ended lower Wednesday in volatile trading, as official government data showed that U.S. crude inventories climbed for the first time in eight weeks and an index for the U.S. dollar strengthened to highest level in about a year.
West Texas Intermediate crude fell 46 cents, or 0.6%, to settle at $74.83 a barrel, Brent crude declined by 45 cents, or 0.6%, to $78.64 a barrel.
Putting the numbers in perspective, “normally, we see increases in crude supplies at this time of year,” said Phil Flynn, senior market analyst at The Price Futures Group.
The global oil market is also under pressure “because the dollar has shown some pretty good strength for the last couple of days,” pressuring prices for dollar-denominated crude oil, he said.
U.S. oil production has climbed, but it’s “still not coming back fast enough to alleviate tight supply concerns,” said Flynn.
Prices for both WTI and Brent crude oil settled Monday at highs not seen for a front-month contract since October 2018.
The EIA reported on Wednesday that U.S. crude oil inventories rose by 4.6 million barrels for the week ended Sept. 24. That defied expectations for an average decline of 4.5 million barrels expected by analysts polled by S&P Global Platts. The American Petroleum Institute on Tuesday reported a 4.1 million-barrel increase, according to sources.
The EIA also reported weekly inventory increases of 200,000 barrels for gasoline supplies and 400,000 barrels for distillates. The S&P Global Platts survey had forecast a supply increase of 700,000 barrels for gasoline and an inventory decline of 2.2 million barrels for distillates. However, API had reported larger inventory increases of nearly 3.6 million barrels for gasoline and 2.5 million barrels for distillates.
“There is a growing concern that products such as gasoline and distillates are still too far below normal to make us feel comfortable,” Flynn told MarketWatch. “Refiners are really going to have to kick it up in high gear to meet demand and I think that’s given the oil a bid.”
The Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, are scheduled to meet on Monday to discuss oil production plans and review the energy outlook.
Nasdaq stocks continue to struggle, but Dow adds 90 points on Wednesday
The S&P 500 and the Dow Jones Industrial Average rose slightly on Wednesday, but the technology sector struggled again as the 10-year Treasury yield traded volatilely.
The Dow rose 90.73 points, or 0.26%, to 34,390.72, and the S&P 500 added 0.16% to close at 4,359.46. The tech-heavy Nasdaq Composite was the laggard, falling 0.24% to finish at 14,512.44. The moves came after the Nasdaq posted its worst day since March on Tuesday amid a spike in bond yields.
Tech stocks, which were hit hardest during Tuesday’s market rout, struggled to maintain a rebound on Wednesday. Shares of Apple rose 0.6%, and Netflix jumped 2.6%, but shares of Amazon and Alphabet declined. The Nasdaq was in the lead when the market opened, but fell behind the other major averages as the session progressed and Treasury yields recovered.
Meanwhile, defensive stocks performed well, as the utilities sector outperformed. Additionally, aerospace giant Boeing rose 3.1% to be the best performer in the Dow. The energy sector rose again even as natural gas prices pulled back sharply.
“Higher bond yields post last week’s more hawkish [Fed], along with higher oil prices, stabilization in high frequency economic indicators, and evidence that the latest Covid surge in the U.S. has peaked, have pressured the Growth trade and bolstered the Value and Small Cap trades – a shift in leadership/ rotation that’s become yet another hurdle for the S&P 500 given the index’s heavy bias towards secular growth,” Lori Calvasina from RBC Capital Markets said in a note. “Our bottom line, we think choppy conditions in U.S. equities will persist a while longer.”
Semiconductor stocks dipped after Micron gave an earnings and revenue outlook for the first quarter of 2022 that missed consensus estimates, sending shares down 2%. Nvidia and Advanced Micro Devices also declined.
On the positive side, shares of discount retailer Dollar Tree jumped 16.4%, making it a top performer in the S&P 500, after the company announced that it was increasing its stock buybacks and experimenting with higher prices in some locations.
The issues for chipmakers and price hikes by retailers come amid growing concern about supply chains, which have seen continued disruptions from the Covid-19 pandemic.
The Dow and S&P are now down 2.7% and 3.6%, respectively, for September. The Nasdaq is down nearly 4.9%.
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