Oil, Stocks Rise Ahead of Fed Minutes Tomorrow

Stocks picked up steam again today, riding the wave from their third consecutive week of gains. This uptick was fueled by the growing belief that the U.S. might soon ease up on interest rate hikes, especially as the economy begins to slow.

The S&P 500 saw a 0.4% rise, while the Dow Jones Industrial Average climbed by about 110 points, marking a 0.3% increase. The Nasdaq Composite, known for its tech-centric portfolio, gained 0.7%, kicking off the holiday-shortened week on a high note.

The market’s resilience is largely attributed to the cooling inflation, which has led many to speculate that the Federal Reserve might put a pause on its rate hikes. The big question now is when might the Fed cut rates, with market traders estimating a 30% chance of this happening as early as March.

Tuesday is set to be a pivotal day, with the release of the minutes from the Fed’s last meeting. These could provide crucial insights into the rate cut debate. However, with a relatively light economic calendar and the Thanksgiving holiday just around the corner, trading activity might remain subdued.

All eyes are on Nvidia, whose financial results are due tomorrow as well. The chipmaker’s previous earnings report had a significant impact on the market, particularly with the rising buzz around AI technologies.

In related news, Microsoft’s shares experienced a boost of more than 1% in afternoon trading. This follows the tech giant’s decision to appoint Sam Altman to lead a new AI research team, despite the weekend’s unsuccessful attempts to reinstate him as the CEO of ChatGPT maker OpenAI. Emmett Shear, former Twitch chief, has been named as his replacement.

In the commodities sector, oil prices experienced an uptick amid speculations that Saudi Arabia and its OPEC+ allies might announce further production cuts at their upcoming meeting. West Texas Intermediate crude futures rose by as much as 2.4%, extending the rally from Friday. This rise is partly attributed to traders rolling over their positions ahead of the U.S. benchmark’s December expiry, contributing to heightened volatility. Additionally, a weaker U.S. dollar has made commodities priced in the currency more attractive.

Despite a 5% decline in crude futures for the year and a series of weekly losses, there’s anticipation that OPEC+ might reaffirm existing production quotas for 2024. Saudi Arabia, the group’s leader, is expected to maintain an additional cutback of 1 million barrels per day into the next year.

“We’re retracing some of the losses last week on ideas the selloff by fund liquidation was probably over-exaggerated,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities. The possibility of extended cuts following the upcoming OPEC+ meeting “is keeping the buyers present today.”

In the Middle East, meanwhile, shipping risks were in focus after a Japanese-chartered vessel was seized in the Red Sea by Iran-backed Houthi rebels. Tokyo-based Nippon Yusen KK said the Galaxy Leader, a vehicle carrier, was taken in the southern part of the waterway on Sunday.

Overall, though, as recession fears start to snowball, this should press down on oil more than an OPEC+ cut would support prices unless, of course, the cut is big enough to do so. We’ll find out soon, but the bigger market revelation comes tomorrow with the release of the Fed’s minutes, which have the potential to finally end the current stock rebound.


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