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MARKETS

On Thursday, U.S. stocks bounced back across the major exchanges, staging a solid recovery after their worst day since September on Wall Street.

The S&P 500 surged, recouping its previous days' losses and more spearheaded by a Big Tech revival whitewashing the previous day's downturn when Alphabet (GOOGL) and Microsoft (MSFT) saw their shares decline despite reporting stronger-than-expected profits.

Of course, the proximate cause of yesterday's selloff was debatable when panic gripped Wall Street when a small but furious and growing crowd believed the commercial real estate day of reckoning was upon us.

Nonetheless, Big Tech stocks carry a big stick on Wall Street due to their weighting and influence, particularly after their remarkable performance last year. Amazon (AMZN), Apple (AAPL), and Meta Platforms (META), slated to report their latest results after Thursday's trading, faced high expectations to deliver impressive numbers to justify their surging valuations.

In after-hours trading, Meta Platforms stole the spotlight by exceeding analysts' expectations for profit and revenue. Additionally, the company announced plans to initiate dividend payments to its shareholders.

Essentially, the narrative remains consistent each quarter for mega-cap companies, barring a few turbulent reports in 2022. Generally, their financial numbers continue to meet or exceed expectations. These corporate giants have become ingrained in the fabric of life for people across both developed and developing nations, symbolizing a significant portion of daily existence. While there may be occasional dips in performance, very few quarters can be classified as objectively negative. The perception of a "bad" quarter often depends on relative or subjective measures rather than absolute balance sheet shortcomings.

The broader market also received a boost from reports indicating the economy's resilience and potential easing of inflationary pressures. Such data could furnish the Federal Reserve with the evidence it seeks for a slowdown in inflation before considering interest rate cuts, a sentiment echoed by the Fed chair's cautionary statements a day earlier.

Thursday's U.S. data, mainly when considered with the favourably cool ECI report on Wednesday and the ADP miss, skewed demonstrably dovish ahead of NFP.,

Indeed, all eyes and ears are trained in NFP. While Powell played down a March rate cut, he also said, "If we saw an unexpected weakening in the labour market, that would certainly weigh on cutting sooner." Hence, it could be Frantic Friday on any NFP beats or misses but an extremely bullish one if the jobs report shows a jump higher in the unemployment rate that justifies a March cut,

In summary, strong economic growth, an A.I. fillip, ebbing inflation, and Fed rate cuts in the pipeline are ostensibly one of the most bullish elixirs for Wall Street stocks; hence, ebullient investors reembarked on yet another S&P 500 summit climb.

OIL MARKETS

Oil futures fell precipitously Thursday on reports of a potential ceasefire between Israel and Hamas that will likely ease geopolitical tension in the Red Sea -- a vital water passage for global oil trade.

FOREX MARKETS

The U.S. dollar lost some gains due to soft labour market data, but safe-haven demand eased amid a potential cease-fire in the Middle East.

GOLD MARKETS

Gold prices increased as bullion dealers overlooked Fed Chair Jerome Powell's hawkish remarks after the recent FOMC meeting. This increase was supported by data indicating a slowdown in the labour market. Moreover, a weaker USD and concerns about commercial real estate loans weighing on the global banking sector increased investor interest in the precious metal. However, with the apparent easing of geopolitical tensions in the Red Sea, the weaker U.S. dollar and the Fed rate cut narrative will have to do the bulk of the gold market's heavy lifting.

COMMERCIAL REAL ESTATE RISKS

It's challenging to trigger a crisis from a well-known risk that has been front and center in media circles and always a top de jour in New York City Bank boardrooms since Wall Street stood still on Covid-19 lockdown day.

However, recent events like New York Community Bancorp's market value plummet have captured short sellers' fancy as a significant maturity wall looms.

As downbeat office space valuations emerge, banks will be forced to raise loan loss provisions, leading to unpredictable one-day selloffs in lenders with substantial CRE exposure. Then, rating agencies may review and downgrade, potentially creating a self-fulfilling bearish prophecy. However, large banks' exposures are relatively low compared to smaller ones, cushioned by diverse revenue streams; hence, a broader banking sector systemic meltdown is very unlikely.

While CRE may not evolve into a systemic crisis due to its widely recognized nature and as banks make provisions for the inevitable loan losses, recent events may mark judgment day on CRE. But given these developments, the Fed might reconsider its decision to halt new loans through the BTFP in March.

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