US Close – S&P 500 enters bear market, Fading Rallies, Deere shares hit hard, Footlocker rallies, Oil rises, Gold steady, Bitcoin lower

At the beginning of the year, no one thought that the S&P 500 was headed to bear market territory, but persistent inflation, another Fed policy mistake, and recession fears have unnerved investors. The S&P 500 has lost over 20% of its value from the January high and it seems that that technical selling will only accelerate.  The way macro backdrop is unfolding, it seems traders will continue to fade any rallies that emerge until the Fed starts to show signs that they are worried about financial conditions and that they may stop tightening so aggressively. 

Earnings

Deere & Co. signaled inflation is going to get worse as sales missed due to surging farming costs.  The agricultural world is facing high costs and they are not buying new equipment, which could mean higher food costs over time. 

Foot Locker surprised with decent results and provided a surprisingly positive report when compared to what we heard from Target and Walmart earlier in the week.  Foot Locker shares might be higher, but the stock was beaten up over the last several months. 

Oil

Despite a wave or risk aversion hitting Wall Street, crude prices still remain supported as oil markets will remain tight for the foreseeable future. Even a ninth consecutive week of rising rig counts will alter how tight energy traders expect this market to remain. 

A lot of energy stories could keep crude’s bullish streak intact as the European Union is nearing a ban on Russian oil and as the refined products market is poised to get even tighter.

Gold

Gold prices are holding up as Wall Street crumbles over recession fears.  Inflation is not letting up and that has many investors expecting the Fed to continue with an aggressive pace of tightening.  Gold is starting to attract safe-haven flows even as dollar dominance remains in place.  Bond yields are in freefall as investors pile back into  Treasuries. 

Gold is comfortably above the $1800 level and seems like it could become attractive again as investors anticipate another round of stock market selling. 

Bitcoin

Bitcoin remains a risky asset and headed lower after the S&P 500 fell into bear market territory. Risk appetite needs to stabilize for Bitcoin to recapture the $30,000 level and that might not happen for a while.

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