Dollar dips, Crypto woe, bank results, Tesla price cuts - what's moving markets

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By Geoffrey Smith 

Investing.com -- The dollar softens and bonds rise as markets bet on a pivot from the Federal Reserve later this year. JPMorgan, Citigroup and Bank of America kick off the fourth-quarter earnings season. Tesla hurts sentiment with another price cut, and the SEC charges Gemini and Genesis with illegally offering securities. And oil hits a 10-day high on a brighter outlook for the world economy. Here's what you need to know in financial markets on Friday, 13th January.

1. Dollar dips on Fed pivot hopes 

The dollar fell to its lowest level in seven months, while bond yields stabilized after falling sharply on Thursday, as another drop in U.S. headline inflation emboldened hopes of a quick end to interest rate hikes from the Federal Reserve, and even a first cut in the second half of the year.

By 06:15 ET (11:15 GMT), the dollar index was down a little less than 0.1% at 102.20, with its strongest losses coming against a revitalized yen, reflecting the fact that the Bank of Japan has only recently started contemplating any tightening of its own monetary policy.

The decline in the consumer price index was arguably less impressive than it seemed at first, owing nearly everything to a 9% drop in gasoline prices that can easily be reversed. However, analysts were nearly unanimous in seeing the numbers as proof that inflation has peaked. That should be reflected in the ‘inflation expectations’ component of the Michigan Consumer Sentiment survey due at 10:00 ET.

2. Bank results kick off earnings season

The improvement in bond market sentiment has probably come too late for Wall Street’s finest to salvage something from the wreckage of 2022, but the turnaround in sentiment since the start of the year will perhaps put more weight on the outlooks given by JPMorgan (NYSE:JPM) boss Jamie Dimon and his peers when they report earnings before the bell.

JPMorgan, Citigroup (NYSE:C), Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC) all report early, with a high degree of uncertainty over how well they have negotiated the choppy markets in the last quarter of last year. Also of interest will be how much they raise their provisions against credit losses against a backdrop of a slowing economy.

Those looking for silver linings can point to Blackrock (NYSE:BLK), which has already posted better-than-expected numbers despite announcing layoffs earlier in the week.

3. Stocks set for weekly gain; Tesla hurts mood with fresh price cuts

U.S. stock markets are set to open fractionally lower later, after advancing on Thursday in response to the inflation numbers, which were followed by more hints from Federal Reserve officials that the central bank may only raise the fed funds target range by 25 basis points at its February meeting.

By 06:30 ET, Dow Jones futures were down 42 points, or 0.1%, while S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.4%. The main cash indices had gained as much as 0.6% on Thursday and are set to close the week with gains of between 2% and 3.8%.

One fly in the ointment may be Tesla (NASDAQ:TSLA) and the rest of the automotive industry, after the EV maker slashed its prices in the U.S. and Europe. The move will allow its Model 3 sedans and Model Y crossovers to qualify for U.S. federal tax credits and will help it shift inventory after it missed its delivery targets at the end of last year – albeit at the expense of profit margins. Tesla stock fell 5.2% in premarket and the news also dragged down European rivals Mercedes (ETR:MBGn), Volkswagen (ETR:VOWG_p) and Stellantis (EPA:STLA) (NYSE:STLA).  

4. SEC charges Gemini, Genesis

The Securities and Exchanges Commission charged both Genesis and Gemini with illegally offering securities to U.S. customers, in another heavy blow to a crypto industry still reeling from the collapse of FTX.

The SEC’s move had been expected, but further complicates efforts to unblock accounts at Genesis which suspended client withdrawals after losing money in the collapse of both FTX and the Terra/Luna collapse earlier in 2022.

The move was criticized as “super lame” by Gemini co-owner Tyler Winklevoss, who, with his twin brother Cameron, own one of the biggest remaining cryptocurrency hoards. Those holdings may have to be at least partially liquidated if the SEC extracts a heavy settlement from Gemini.

Elsewhere, Bulgarian-based crypto platform Nexo also ran into trouble, being raided by local authorities on suspicion of aiding money laundering.

5. Oil hits 10-day high as dollar cheapens

Crude oil prices hit their highest in 10 days as the dollar weakened amid hopes for an easier U.S. monetary policy that will allow other central banks around the world to give more support to their economies, too.

The effect of the U.S. inflation figures outweighed that of weak Chinese trade data for December, which showed both imports and exports continuing to fall in year-on-year terms.

By 06:50, U.S. crude futures were up 0.7% at $78.97 and Brent was up 0.7% at $84.60. The Baker Hughes report on drilling rigs and the CFTC’s positioning data close off the week later.