US stocks showed strength on Wednesday, as major indices ended higher amid expectations for important economic data. The US Consumer Price Index (CPI) and the earnings season are on the horizon, sparking a rally in technology and consumer discretionary stocks, as well as significant changes in the energy sector.
The S&P 500 rose by 0.6%, the Nasdaq advanced by 0.7%, and the Dow Jones added 170 points. Consumer discretionary and tech sectors led the way, with Meta surging by 3.6%, hitting its highest level since September 2021. NVIDIA increased by 2.2%, and Microsoft gained 1.8%, reaching its highest level since November. On the other hand, energy and materials lagged behind, with Exxon Mobil (-1%) and Chevron (-0.8%) dropping to their lowest levels in four weeks.
Oil Market Surprises
Crude oil inventories in the US went against market forecasts, rising by 1.338 million barrels in the week ending January 5, 2024, instead of the expected draw. Gasoline stocks jumped by 8.029 million barrels, and distillate fuel inventories increased by 6.528 million barrels, both surpassing market predictions. The surprising data caused volatility in energy sector stocks.
Wholesale Inventories and Mortgage Applications
US wholesale inventories dropped by 0.2% month-over-month in November 2023, marking the second straight decline. Non-durable goods, such as chemicals, apparel, and groceries, were the main drivers of the fall. Conversely, mortgage applications in the US soared by 9.9% in the first week of the year, bouncing back strongly and matching expectations of a looming rate-cutting cycle by the Federal Reserve.
Global Economic Sentiment
The euro stayed slightly above $1.09 amid remarks from ECB policymakers, who suggested the possibility of a technical recession in the second half of 2023. Investors are keenly awaiting the upcoming US inflation report for hints on potential interest rate cuts by the Federal Reserve.
Bitcoin ETFs Approval
In a major development, the Chicago Board Options Exchange (CBOE) announced the official start of trading for VanEck, Fidelity, and ARK 21Shares Spot Bitcoin Exchange-Traded Funds (ETFs). This marks a milestone in offering regulated and direct access to Bitcoin. Enabling both institutional and retail investors a clear route to Bitcoin investment.
Alongside the wider market movements, Bitcoin and Ether posted notable gains. Ether led the way with a 4.82% rise, while Bitcoin followed with a 2.18% increase. The approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) further confirms the mainstream adoption of cryptocurrency investments.
The market’s lively performance, unexpected oil inventory data, and the approval of Bitcoin ETFs highlight the dynamic nature of the financial landscape. As investors keep an eye on economic indicators and corporate earnings releases, the market is ready for more developments in the coming days. The possibility of interest rate changes, along with the growing acceptance of cryptocurrency, adds an interesting dimension to the ongoing market story.