Markets fought their way back from the lows today to hold onto the gains from yesterday’s post Powell rally. Another round of economic data was the focal point throughout the day as PCE and ISM reported for the month of October. PCE core data MoM, which Powell has stated is his main metric for current inflation, posted a sequential decline.
Was that Prince playing in the background during Powell’s appearance today or was my mind playing tricks on me? It was a tale of two sessions…pre-Jerome and post. One could also say it was a case of two Jeromes, the one we got back at Jackson Hole where he did his best Marcellus Wallace impression, and the far softer version we got today.
Markets were under water for the majority of the US session in Tuesday trading despite a rebound overnight as China re-opening speculation/fallout from unrest continues to unfold. There was little in the way of market impetus for today and, therefore, little conviction as well with breadth split ~55/45 up vs down.
While not the greatest of weeks for trading activity, the Thanksgiving holiday provides the Street a nice little mini-break before gearing up for the end of year home stretch. Equities have been “on one” as the saying goes since hitting their yearly low mid-October. Whether they can continue that momentum for what’s left of 2022 will depend on factors that have little to do with the fundamental health of the companies themselves.
Thanksgiving is finally here, but before investors gorge on the turkey, they had a full appetizer of economic data to feast on. The days of 75s look to be getting close to terminating, and markets have become cautiously optimistic the actual terminal rate level is not too far off as well. Therefore, poor data is the whip crème on those expectations.
US markets progressing steadily upwards and onwards today to the higher end of recent rangebound trading, which, until today the S&P had not seen a >1% move in either direction for 7 straight days. In case anyone is counting… SPX closed above 4k and INDU 34k (Dow 34k hats anyone?!)- both key psychological levels as we head deeper into a Thursday Thanksgiving holiday this week.
The turkey isn’t stuffed just yet. Investors were still a bit sore this morning after stocks fell last week, as optimism about cooling inflation was tempered by more hawkish tones from Fed officials. That sentiment spilled into the start of this holiday shortened week, as fears returned over tight COVID restrictions in a Chinese city many thought to be a test case for looser policy.
Winter is coming. Just ask your friends up in Buffalo, New York, as they dig themselves out of four feet of snow! But judging by oil futures, one would never know — crude was down 1.75% on the day and ended the week down 10%. Energy is up 65% y/y, so conversations are beginning to rumble in regard to demand concerns, recessionary fears and hence, some cracks in the pavement for crude/energy.
Markets have come really far, really fast, and the risk of late has been for a pause or reversal. (Foreshadowing inserted). The past 2 days have seen a little of that risk coming to life. Hawkish tones could be heard across the land today as markets were unable to find their footing from the opening bell. This was mostly thanks to the various Fed speakers who graced the media wires.
The errant missile yesterday offered a reason for traders to take profits, especially as US indexes approached some interesting resistance levels. The S&P 500 was hovering around 4000, and Nasdaq around its 100-day (11,511), and many sectors had similar patterns. Even though positioning remains defensive with higher-than-average cash levels, investors had to protect themselves in case a year-end rally takes hold.