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Looking at the last two trading days of the week
By Mark O’Brien, Senior Broker
Continued dollar strength this week, an expected more hawkish leaning by Fed officials in today’s release of last month’s FOMC meeting minutes and a more widespread sentiment that higher U.S. rates will cause a recession all have provided the backdrop against the downward bias in the major equity indexes. Along the same lines, the stronger dollar has added to the negative macro view toward physical commodities. Paradoxically, U.S. economic data continues every so often to post positive data and that has reduced recession fears. On balance, it appears the path of least resistance for equity indexes looks to be down for now.
Energy: Natural gas (March contract) pierced through the $2.00 price point for the first time since September 2020 before rebounding up to positive territory as of this typing. That’s a precipitous ±$34,000 per contract move from the contract’s recent ±$5.40 highs going back almost three months to the day. Bearish fundamentals can take credit for the sell-off, notably a ±19% decline in demand among the 27-nation European Union from last August into January and continued poor U.S. demand as above normal temperature forecasts for the U.S. nationally remain intact through the first week of March. The major winter storm crossing the country through the end of the week looks to be providing minimal support.
Metals: Gold (April) remains mired near its lows for the year near ±$1,835/oz, not eager to recover from its ±$130 slide since its ±$1,970/oz. intraday high of Feb. 1, a ±$13,000 move.
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