Tesla pops: All eyes await this week’s Federal Reserve policy meeting

 

Stocks rose Friday and capped off a winning week fueled by better-than-expected economic growth and a pop in Tesla shares.

Investors have been weighing economic data released on Friday ahead of this week’s Federal Reserve policy meeting.

To close the day, The Nasdaq Composite jumped 0.95 per cent, while the S&P 500 gained 0.25 per cent. The Dow Jones Industrial Average added 0.08 per cent.

All the major averages posted a positive week and are on pace for a month of gains. The tech-heavy index rose 4.32 per cent and closed out its fourth week of gains. It’s on pace for its best monthly performance since July. The S&P and Dow added 2.47 per cent and 1.81 per cent, respectively, this week.

Earnings season has pressed on, with strong guidance boosting American Express shares by 10.5 per cent despite a top-and bottom-line miss. Some chip stocks rose even as Intelslumped more than 6 per cent on a dismal earnings report that missed expectations.

Tesla rose 11 per cent Friday, and more than 33 per cent for the week after reporting record revenue. It marked the electric vehicle stock’s best weekly performance since May 2013.

This coming week brings earnings reports from many of tech’s most important players, including Meta Platforms, Apple, Alphabet, and Amazon.com. The results should shed new light on the ad market and consumer spending trends. And they will provide fresh insights into the most important trend in enterprise technology: cloud computing.

The Fed is expected to raise interest rates at a milder pace when its policy makers meet this week. The personal consumption expenditures price index, excluding energy and food, showed prices rose 4.4 per cent from a year ago, the Commerce Department said, and in line with the Dow Jones estimate. So-called PCE is a preferred inflation gauge for the Fed.

The US dollar has wilted against its peers in the opening month of 2023 as the Federal Reserve fades as the key driver in currency markets and investors focus on the policies of other major central banks.

The Fed’s campaign of big rate rises captivated investors in the first nine months of 2022, igniting a rush into the dollar.

But as the US central bank has slowed its increases in borrowing costs, the currency has slid against its peers.

The dollar has fallen 1.5 per cent in January against half a dozen major currencies, leaving it on track to record its fourth-straight monthly decline. It is now trading at levels last seen in May 2022.

In sector news, Consumer Discretionary was the standout, up 2.27 per cent, whilst Energy was the worst performer, down almost 2 per cent.

To Commodity news, industrial metals have ripped higher since November on bets that China’s reopening will boost demand for raw materials. A group of “base metals” led by tin, zinc and copper have surged more than 20 per cent in three months, further supported by the US Federal Reserve signalling a slowdown in the pace of interest rate rises and a softening in the US dollar, which importers use to buy commodities.

Star performer tin has rocketed almost 80 per cent, the highest level since June, while copper prices have rallied by a tenth this month on brighter prospects for China’s economy following the easing of its zero-Covid policies.

Gold is starting the year with gains. Gold purchases by everyone from central banks to institutions and ordinary investors have lifted the precious metal in 12 of the past 17 sessions, according to Dow Jones Market Data. The most-actively traded gold futures contract has climbed nearly 20 per cent to its highest level since April 2022. The advance comes after rising interest rates dragged gold to a lukewarm 2022, and was disappointing to those who had expected it to thrive during a time of elevated inflation. Now, signs of cooling price increases and weakening growth are lifting investors’ hopes of a respite from the Federal Reserve’s aggressive rate increases

And China is considering ban on export of solar wafter technology. Currently China accounts for 97 per cent of global output of wafers. The technologies increase the electricity output, reducing the cost needed to produce each unit of power and are key to accelerating transition to renewable energy. The deadline for public comment is 28-Jan.

The catalyst is clear: Policy makers in the world’s second-largest economy are pulling out the stops to revive the economy and get its 1.4 billion people spending more, after three hard years of stringent Covid restrictions and harsh crackdowns on technology and other industries. Beijing has completely reversed its zero-Covid policy and has begun loosening regulations on business.

Futures

The SPI futures are pointing to a 0.2 per cent gain.

Currency

One Australian dollar at 8:20 AM has weakened compared to the US dollar on Friday buying 71.02 US cents (Fri: 71.16 US cents).

Commodities

Gold lost 0.1 per cent. Silver fell 1.7 per cent. Copper shed 1.1 per cent and oil dropped 1.6 per cent.

Figures around the globe

Across the Atlantic, European markets closed higher. London’s FTSE added 0.1 per cent, Frankfurt gained 0.1 per cent while Paris closed flat.

In Asian markets, Tokyo’s Nikkei added 0.1 per cent, Hong Kong’s Hang Seng gained 0.5 per cent while China’s Shanghai Composite was closed.

On Friday, the Australian sharemarket closed 0.3 per cent higher to close at 7,494.

Ex-dividends

Djerriwarrh Investments (ASX:DJW) is paying 7.25 cents fully franked
Gryphon Capital Income Trust (ASX:GCI) is paying 1.28 cents unfranked
Perpetual Credit Income Trust (ASX:PCI) is paying 0.5593 cents unfranked
360 Capital Enhanced Income Fund (ASX:TCF) is paying 3.5 cents unfranked

Dividends payable

Metcash (ASX:MTS)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap. Disclaimer

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