US stocks got a little boost after the  provided a sprinkle of dovish hints. The word of the week is ‘calibrate’. Officials are already talking about a calibration to the pace of tightening which means we are getting closer to that Fed pivot.

Earlier, Pepsico quarterly provided some optimism that this earnings season wasn’t going to be all doom and gloom.  Pepsi delivered a strong earnings beat and raised their guidance. 

Minutes

The Fed Minutes showed tightening will continue even as the labor market slows.  The key takeaway from the minutes was that several participants noted that it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook. We’ve heard from Fed’s Daly and Brainard and they have voiced support for remaining data-dependent when it comes to future hikes and right now it looks the data is about to get ugly.  It will be hard for the Fed to remain aggressive with tightening as the economic deteriorates quickly.

The Fed is giving us subtle dovish hints here and that is good news for risky assets.  Officials saw slowing the pace of hiking at some point and that could easily happen after the November FOMC meeting.  Investors should continue to expect a 75bp rate hike at the November 2^nd FOMC decision, but a downshift in December would be likely if the global growth outlook continues to deteriorate and if the US economy softens.  

Oil

Crude prices tumbled after reports that Russia was willing to sell oil at a discount.  Russian seaborne oil deliveries are about to have a price cap put in place and it looks like Russia is getting desperate for revenues.  Last month, Russia was threatening they would stop selling oil to countries that would agree to use a price cap, but now it seems like that was just a bluff. 

Oil was heavy all day as today’s news cycle was rather bleak for the crude demand outlook. A hot US report suggests is proving to be sticky and will keep the risk elevated that the Fed will send the economy into a recession.  The German government anticipates a recession is coming next year as inflation runs wild alongside the global energy crisis.  China is also having trouble with COVID again as Shanghai and Shenzhen see infections rise after the holiday. 

Selling pressure on has been strong all week and prices could continue to slide towards the $85 region.  The oil market is still tight despite significant downgrades to the outlook by OPEC has put a tentative end to calls that oil was easily heading towards the $100 level. 

Post Fed-minutes all risky assets, including oil pared losses after several policy makers signaled they are getting ready to calibrate their pace of tightening.

Gold

remains in choppy waters ahead of a pivotal inflation report that could raise the risk of even more Fed tightening.  The latest producer prices report showed inflation is not easing at all and that has some traders expecting more pain to hit the bond market, which will drive the dollar to new heights. 

Gold won’t do much of anything until the inflation report and that means prices should bounce between the $1670 and $1690 levels.

Gold prices popped after the FOMC minutes signaled some policymakers are getting ready to calibrate their tightening path. 

Crypto

continues to hover around the $19,000 level as traders await tomorrow’s inflation report that could make or break risk appetite. Crypto news today focused on a Congressional probe on miners and the strain they are putting on the state’s power grid.

Bitcoin could breakout after the inflation report as Wall Street will have a better idea if the Fed needs to maintain an aggressive tightening stance beyond the November FOMC meeting. If inflation stays hot, Bitcoin could be vulnerable to test last month’s lows just ahead of the $18,000 level.