Stocks rallied this afternoon as bulls attempted to take control. The Dow, S&P, and Nasdaq Composite all rose significantly on a slumping dollar and impressive retail earnings. Treasury yields fell as the 10-year rate decreased to 3.75%, lifting markets.
Best Buy (NYSE: BBY) shares popped over 12% in response to strong forward guidance. The retailer raised its 2023 fiscal outlook after beating analyst estimates in Q3. That’s about as good as it gets for Best Buy considering how dire the situation has been for other specialty retailers.
Dollar Tree (NASDAQ: DLTR), for example, sunk 9% after reporting a rough quarter and worse guidance. Zoom (NASDAQ: ZM) shares fell over 5% as well after reporting similar results.
Market bulls seem impressed by BBY’s beat, which overshadowed the ZM and DLTR misses.
Investors also ignored rising Covid infections in China this morning as stocks rallied. Fatalities and cases increased over the weekend, prompting new lockdown measures from Beijing.
Infections continued climbing through Monday.
“[I] think there were actually two more fatalities last night as well that the authorities reported very late this morning. So we’re getting to the levels that we’ve seen on both infections and fatalities that peaked in April of this year,” said TheStreet senior correspondent Martin Baccardax.
“So we are moving, or at least China is moving, in the wrong direction with respect to its Covid policies.”
Markets didn’t seem to care. A dip in the dollar, as reflected by the US Dollar Currency Index (NYSE: DXY), may have helped smooth things over after the dollar ripped higher on Monday.
The reason for today’s dollar retracement likely had something to do with a report from Japan’s Nikkei.
According to the media outlet, China purchased roughly 300 tons of gold last quarter as part of its latest gold stockpiling campaign.
“China and some other countries must be hurrying to reduce dependence on the dollar,” the report read. News broke of the 300-ton purchase two weeks ago, but the buyer chose to remain anonymous (even though almost everyone knew China did it).
A mystery purchase of “this magnitude is unheard of” according to Koichiro Kamei, a precious metals analyst.
“Seeing how Russia’s overseas assets were frozen after its invasion of Ukraine, anti-Western countries are eager to accumulate gold holdings on hand,” added Emin Yurumazu, a Turkish economist based in Japan.
Market analyst Itsuo Toshima also concluded that “China likely bought a substantial amount of gold from Russia.”
Russia’s gold holdings totaled over 2,000 tons before the transition, which was a win-win situation for both countries. Russia needed cash. China wanted gold to distance itself from the dollar.
And thus, the dollar retreated alongside yields.
Yields look as though they’ll fall further, too, with the bond breakout in full force. The iShares 20+ Year Treasury Bond ETF (NYSE: TLT) broke out above resistance (yellow line) at the early November highs. TLT retraced last Friday and yesterday but is now rising once more. That lends credibility to a longer-lasting equity rally.
Equinor ASA (NYSE: EQNR) seems to be gearing up for a big rally, too after closing above its minor bearish trend (yellow trendline) and the 10-day moving average. EQNR closed above the 50-day moving average also and the stochastic indicator is showing bullish divergence.
For those reasons, it might make sense to take a bullish position on EQNR with a trade trigger of $36.25, above the 20-day moving average, as the general market looks to continue its run.