Wall Street Rallies on AI Hopes; Gold Rebounds and Oil Eases

Market Wrap-Up: AI Optimism Lifts Stocks, Gold Rebounds, and Oil Retreats 

US stocks closed higher on Monday, supported by renewed optimism surrounding artificial intelligence (AI) following Anthropic’s initial public offering (IPO) filing. The S&P 500 and Nasdaq Composite recovered from consecutive weekly declines, although concerns over the scale of AI investment remained in focus ahead of major technology earnings.

The Dow Jones Industrial Average gained 0.28% to 52,361.58, the S&P 500 rose 0.70% to 7,676.77, and the Nasdaq Composite advanced 0.83% to 26,169.38. Semiconductor stocks helped drive the gains, with the Philadelphia Semiconductor Index climbing 2.8%. Tesla also rose 5.2% to its highest closing level in more than three months after Barclays upgraded its rating on the stock.

Anthropic’s filing disclosed substantial losses alongside rapid revenue growth, drawing attention to the potential returns from heavy AI spending. However, Meta fell 1.9% after announcing plans to raise up to $95 billion in equity to fund its AI-related infrastructure expansion. Investors will scrutinise earnings from Alphabet, Microsoft, and Amazon this week for evidence that significant AI investments are translating into growth.

Gold rebounded on Monday after hitting its lowest level since 20 July in the previous trading session. Spot gold rose 0.6% to $4,020.60 an ounce, while US gold futures for December delivery settled 0.8% higher at $4,038.40. Softer oil prices provided some relief from inflation concerns, while bargain-hunting also supported bullion ahead of the Federal Reserve’s policy decision.

Oil prices edged lower on Tuesday amid renewed hopes that diplomatic efforts could ease tensions in the Middle East. Brent crude futures fell 0.57% to $115.15 a barrel, while West Texas Intermediate (WTI) declined 0.43% to $101.32. Diplomatic efforts involving Saudi Arabia, Turkey, Pakistan, and Iran raised hopes of easing regional tensions. However, renewed attacks by Iran-aligned Houthis on Saudi Arabia and continued risks to commercial shipping around the Strait of Hormuz limited the decline.

In foreign exchange markets, the euro weakened against the US dollar on Monday amid concerns over the eurozone growth outlook and elevated energy prices. The euro fell 0.21% to $1.1179, while the Japanese yen declined 0.43% to 157.46 per dollar. The US Dollar Index (DXY) rose 0.31%.

The Federal Reserve is widely expected to leave interest rates unchanged on Wednesday. However, investors will scrutinise its policy statement and forward guidance for clues about the potential path of interest rates in December. The Chicago Mercantile Exchange (CME) FedWatch Tool indicated an 80% probability of a December rate hike in the data cited in Monday’s gold market report. 

Investors will assess Tuesday’s US economic releases for fresh signals on labour-market conditions, consumer confidence, and manufacturing activity. The data could influence expectations for Federal Reserve policy and shape sentiment across the dollar, equities, and other major asset classes.

DXY

Key Takeaways

·         The dollar’s near-term direction will depend on incoming US data and whether the Federal Reserve signals a more restrictive policy outlook.

·         Treasury yield movements and the Fed’s forward guidance remain key factors for assessing the dollar’s momentum.

Technical Outlook

·         Daily Bias: Bullish

·         Support: 101.86

·         Resistance: 102.20

XAU/USD

Key Takeaways

·         Gold’s recovery may face resistance if the Federal Reserve signals that interest rates could remain elevated for longer.

·         A softer inflation outlook could support bullion, while renewed energy-price pressures may complicate the outlook for monetary easing.

Technical Outlook

·         Daily Bias: Bearish

·         Support: 3,975

·         Resistance: 4,034

WTI CFD

Key Takeaways

·         Diplomatic progress could reduce the geopolitical risk premium embedded in crude prices.

·         Persistent threats to energy infrastructure and shipping routes remain an upside risk to oil prices.

Technical Outlook

·         Daily Bias: Bullish

·         Support: 100.00

·         Resistance: 103.96

Dow Jones CFD

Key Takeaways

·         The durability of the equity rebound will depend on whether gains extend beyond AI-related stocks.

·         Upcoming technology earnings could influence broader market sentiment by testing whether AI spending is delivering sufficient commercial returns.

Technical Outlook

·         Daily Bias: Bullish

·         Support: 52,191

·         Resistance: 52,632

Calendar Watch This Week

·         Automatic Data Processing (ADP) Weekly Employment Change: Tracks weekly changes in private-sector employment, offering an early indication of labour-market momentum that could influence Federal Reserve rate expectations.

·         Durable Goods Orders MoM: Measures monthly changes in orders for long-lasting manufactured goods, providing insight into business demand and manufacturing activity.

·         Conference Board (CB) Consumer Confidence: Assesses consumers’ views of current economic conditions and their expectations for the future, offering clues about potential household spending.

·         New Home Sales: Tracks sales of newly built homes, helping investors assess housing demand and the impact of borrowing costs.

·         Richmond Fed Manufacturing Index: Measures manufacturing activity in the Richmond Fed district, providing a regional signal of factory-sector conditions.

·         Federal Reserve Interest Rate Decision: Markets will assess the Federal Reserve's policy stance and forward guidance for clues about the December interest-rate outlook.

·         Core Personal Consumption Expenditures (PCE) Price Index MoM: Tracks underlying US inflation and could influence expectations for future Federal Reserve decisions.

·         European Central Bank (ECB) Interest Rate Decision: Investors will look for indications of the ECB's approach to inflation and future policy decisions. 

·         Bank of Japan (BoJ) Interest Rate Decision: Markets will focus on the Bank of Japan's policy stance and the possibility of a shift in its interest-rate approach. 

·         Reserve Bank of New Zealand (RBNZ) Interest Rate Decision: The announcement could influence New Zealand interest-rate expectations and the NZ dollar.

·         Bank of Canada (BoC) Interest Rate Decision: Markets will assess the Bank of Canada's policy stance and implications for future rate adjustments.

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