Momentum still the core driver for stocks
The relief rally in stocks continues to build on itself now that markets have stopped falling. In the absence of an obvious macro drive for the sell-off in early January, the very fact that markets were under pressure was one of the main sources of investor concern. While upward momentum is building, investors remain skittish and markets are vulnerable to bad news. In short, volatility looks set to continue.
The recent bounce in commodity prices is a key part of the current relief rally. The materials and energy sector is likely to attract buying again today.
The oil market remains well over supplied and rallies are likely to be capped. However, in the medium term, there are now also risks to the most pessimistic outlook scenarios. Traders are conscious of the possibility that signs of cuts in Non Opec production may soon start to emerge However; it seems fairly unlikely at this stage that Saudi and Russia will cut production at the cost of their market share as suggested by Iraq’s oil minister.
While other commodities are recovering from recent lows, gold is pushing past its January peak. Rising holding in ETFs and news of strong imports into China via Hong Kong suggest that it has attracted safe haven buying during recent market volatility. While this is good news for Australian gold mining stocks, investors will be balancing this against the negative impact of the stronger Australian Dollar.
Apple has confirmed market fears by reporting a decline in iPhone sales and providing guidance of worse to come in the first quarter. After market reaction has so far been relatively limited in light of the declines already seen in Apple’s stock price. However, revenue momentum is soft and nervousness about Apple’s growth prospects look set to continue over coming months.
Frequently Asked Questions about this Article…
The current relief rally in the stock market is primarily driven by upward momentum as markets have stopped falling. This momentum is further supported by a recent bounce in commodity prices, particularly in the materials and energy sectors.
Market volatility is expected to continue because, despite the upward momentum, investors remain skittish and markets are vulnerable to bad news. This ongoing uncertainty contributes to the likelihood of continued volatility.
Commodity prices are playing a key role in the stock market rally, with recent increases in prices contributing to the relief rally. The materials and energy sectors, in particular, are attracting buying interest due to these price movements.
The oil market remains oversupplied, which is likely to cap rallies. However, there are medium-term risks to the most pessimistic outlook scenarios, as traders are watching for potential cuts in Non-OPEC production, although cuts from Saudi Arabia and Russia seem unlikely.
Gold is attracting safe haven buying due to rising holdings in ETFs and strong imports into China via Hong Kong. This trend is driven by investors seeking stability amid recent market volatility, benefiting Australian gold mining stocks.
While the rise in gold prices is positive for Australian gold mining stocks, investors are weighing this against the negative impact of a stronger Australian Dollar, which can affect the competitiveness of these stocks.
Apple's stock performance has been affected by a confirmed decline in iPhone sales and guidance indicating further declines in the first quarter. Although the market reaction has been limited due to prior declines, concerns about Apple's growth prospects persist.
Investors should consider the soft revenue momentum and ongoing nervousness about Apple's growth prospects. Despite limited market reaction to recent news, these factors suggest that concerns may continue over the coming months.
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