Crude Awakening: Oil’s Back, Now What?

Markets are balancing stronger inflation data against rising energy prices as investors look ahead to key retail sales reports and another wave of Big Tech earnings. Scott Bauer joins the IBKR Podcast to break down the latest Federal Reserve outlook, AI spending, CapEx trends and the market catalysts that could shape the week ahead.

Summary – IBKR Podcasts Ep. 406

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Jeff Praissman

Hi, everyone. This is Jeff Praissman with Interactive Brokers Podcast, and it’s my pleasure to welcome back to the IBKR Podcast Studio, Scott Bauer from Prosper Trading Academy. Hey, Scott. How are you? 

Scott Bauer

Jeff, I am great. Yourself? 

Jeff Praissman

I’m good, I’m good. I always love having you come in on these Wednesdays, where we do a little quick rundown of the week before and the week ahead. 

Yeah, let’s kick it off, Scott. So last week, what was the biggest market story? And why did investors pay attention to it? 

Scott Bauer

It was the Fed. It was the anticipation leading up to earnings and also the big IPO of SK… I always mispronounce it. SK Hynix, I think it is. So I think the market really embraced that after the SpaceX IPO. But we’re seeing the same results, and maybe the market is now getting a little bit more cautious about IPOs and maybe not believing all the hype. 

But I think that, and really the Fed, and then the follow-up this week with the Fed and where interest rates may go. 

Jeff Praissman

Got it. Got it. And it seems like every time you’re in here, we’re talking about oil prices, whether they’re rising or falling, and they were rising. So how did the rising oil prices and global events affect the market last week? 

Scott Bauer

It’s so interesting because when you look at the reports this week, the inflation reports, and we see those numbers being really good, that’s because that included oil prices, gas prices down from a month, six weeks ago. So that was really good. But now that oil prices are back up again and significantly higher, my concern is that’s gonna have some really negative fallout in the next reports we get. 

So this constant back and forth, back and forth, I think is very difficult for the markets to really parse out. 

Jeff Praissman

Yeah, ’cause those reports are lagging, right? Time lagging. And it’s interesting ’cause my… You kind of put me in a tough spot here, Scott, ’cause my next question’s based on last week’s economic reports, is the US economy showing signs of trends are slowing down? So based on reports, it’s showing signs of strength. 

However, in reality, with the events unfolding last week, it may be slowing down a little bit. 

Scott Bauer

Yeah, and Jeff, I think we spoke about this last time too, about these reports that come out. Like you said, they’re not real time, right? They’re lagging data. So what we just saw here, great, inflation numbers are down, but that is because those gas prices were down. So oil has rallied, what are we seeing, 10% plus since the last week or two. 

So I think that’s gonna be a tough one for inflation on the next reports that we get. 

Jeff Praissman

And let’s look ahead now, because there’s always reports coming out. So which economic reports should investors be watching most closely this week coming up, like the next five days or so? 

Scott Bauer

Sure. So we had some inflation reports. We’re gonna get some manufacturing reports. But I think we have to focus also on the consumer and retail sales. Boy, it’s over and over and over we talk about how the consumer has been so resilient. Retail sales have really held up. 

And I have a feeling that we’re going to see some really good, robust numbers because of what we just talked about, because of those gas prices being so much lower, and that really may be factoring into consumers feeling, “Oh, maybe I have a little extra money here to spend.” So we gotta focus on that, and for me, if that number is really, really a solid, positive number, I think we’re gonna have to take that with a grain of salt. 

Jeff Praissman

Gotcha. So again, that retail sales report, it’s still maybe not the full picture of the health of consumer given maybe the health of the consumer a while ago, a few weeks ago, but not necessarily now. 

Scott Bauer

Exactly. 

Jeff Praissman

And then of course too, we got earnings, right? So what are the big earning events next week and which ones have maybe the greatest potential to move the markets? 

Scott Bauer

So far the banks were really, really good. Now we look ahead and we’ve got some of the big ones coming out, and the big tech stocks, the semis, those are really gonna be the key. Can they keep up margins? What’s the CapEx going to be like, right? The markets were really fearful of the amount of CapEx that some of these companies were spending, and then it’s almost like they wrote it off, and it was fine. So I think the big concern is going to be, is AI really going to pay off with the amount of CapEx that these companies are really spending on? So when we see the likes of Google and Amazon and Meta and Microsoft and all of those coming up, that’s really gonna be the focus. 

Jeff Praissman

Scott, this has been great as always. For our listeners, you can find more from Scott at Prosper Trading Academy, and look for him to stop by our studio, usually every other Wednesday. And again, always a pleasure, Scott. 

Scott Bauer

Jeff, thanks so much.