The View from 5th Avenue – 6 September 2022

Even with a long weekend under their belt, investors were in no mood to look at the markets positively. The themes remain the same, and the negativity highlighted once again. China has been locking down due to covid (65 million people), Nord Stream is shut for maintenance, and Australia raised rates 50bps to start this week of Central Bank meetings. In the US, ISM Services data rose to 56.9 in August, its 27th straight month above 50, indicating the economy could allow the Fed to keep to their higher for longer mantra (something Powell will likely talk about Thursday). 3900 has been a level the S&P 500 has been using as a short term support, and that battle continued throughout today’s session. Reits (IYR +1.15%) outperformed as Costar (CSGP +7.5%) and Invitation Homes (INVH +4.7%) will both be added to the S&P 500, but most sectors closed lower. Semis fell 1.2% as the index trends back to this year’s lows, and the broader weakness in tech (mega names -1% on average) led to a seventh down day for the Nasdaq. Last time this happened was in November of 2016. A similar red theme occurred in Treasuries with the 10-yr yield rising to 3.34% as traders positioned for a busy week of IG supply. According to Bloomberg, $50bn is expected to be priced (McDonald’s and Walmart were mentioned), adding to the selling pressure USTs have been witnessing since Jackson Hole. With the lack of confidence to support equities right now, investors will likely keep to their cautiousness. Tomorrow the conference calendar picks up, and that could lead to companies updating their outlooks (Church & Dwight lowered FY revs this morning). Adding the Beige Book at 2pm (good news is bad news), and markets may have a weak Wednesday.