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SPX just shy of 4600

SPX just shy of 4600

Headline this week:

It appears that buy on dips works even on a day-to-day basis with SPX rebounding to record highs from a big risk-off move the prior day. Volumes were in line and all sectors flashed green (led by Real Estate) with 80% of the constituents closing higher in a strong showing overall. The catalyst for such a rally, though, is not readily obvious. If it was earnings optimism, then that took it hit after Amazon and Apple earnings disappointed the post-market. Facebook's rebranding to Meta (new ticker MVRS starting Dec) drew scepticism as well. Not much help on the economic data front with Q3 GDP coming in at 2% (vs 2.6% exp and 6.7% prior) though weekly jobless numbers stayed true to their downtrend.

Market Updates:

Fixed income seems to be where the action is these days. The US yield curve saw some steepening on the day as the 2Y came off around 7 bps from the intraday highs. The ECB press conference saw significant hawkishness injected into market expectations despite the policymakers' contention that it was not their intent to do so. Two 10 bps hikes are now priced in by Sep 2022 and EUR was the strongest currency on the day (+0.7% against the USD). The removal of the word 'temporary' when describing inflation spikes and the likely stopping of asset purchases in March could be pinpointed as key considerations for the change in sentiment. Not much on price action after the BoJ though, where no moves are expected in 2022.Crypto saw a rebound too with Bitcoin up 4% and back above 60k now. Ethereum gained close to 7% on the day as dip-buying seems strong here. Crude was mostly flat on the day with Natural Gas, Coal and Iron Ore dragging the broad energy sector lower. Metals had a good outing as Gold broke above 1800 once again but still remains largely range-bound for now. Ahead today, GDP and Inflation data from Europe will be scrutinized and we also have Sentiment and Consumption indicators from the US.

By

Kristal Advisors

October 29, 2021

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