1. Moving the markets

After 4 days of declines, the major indexes vacillated around their respective unchanged lines and, despite several breakout attempts, nothing was gained or lost. The exception was gold, with the precious metal adding 1% and closing right at its $1,800 level.

Worries about a worsening recession in 2023 remained on traders’ minds, along with critical upcoming data releases. Jobless claims on Thursday, November’s PPI and preliminary consumer sentiment on Friday will set the stage for next week’s highlights.

On Monday, we will find out whether the CPI has worsened or improved, and on Wednesday, the Fed will either deliver an expected 50 bps rate hike or an unexpected 75 bps. Either one will have an influence on market direction.

Today, even a plunge in bond yields was not enough to support equities, even though the 10-year dropped 11 bps to 3.43%, which caused the US Dollar to stumble and Gold to rise.

We may see some churning and grinding in the indexes until guesswork and uncertainty about the above-mentioned upcoming data sets are removed.   

1. Moving the markets

Yesterday’s downward momentum carried over into today’s session and accelerated throughout the day, but a last hour rebound prevented a worse outcome.

This is now the 4th straight day of declines for the S&P 500, which has now retreated clearly below its 200-day M/A, thereby nullifying its recent break above it. Looking at the bigger picture, all the massive gains following Powell’s alleged “dovish” speech have now been surrendered.

Traders are back to the drawing board, as bullish hope based on a Powell pivot, or pause, has now made room for the bitter reality that a recession, the depth of which remains unknown, will have consequences on earnings and, by association, stock prices.

Round after round of layoffs is proof that, economically speaking, a hard landing is being accepted as likely, while inflation and its impact on consumers remains a wild guess.

Despite the Fed being expected to slow the pace of interest rate hikes from 0.75% to 0.5%, when they meet next week, traders fear that the fallout from any hike will increase recessionary pressures.

Bond yields dipped a tad but not enough to exert a positive influence on equities, with the 10-year dropping down towards its 3.5% level. The US Dollar vacillated around its 200-day M/A, while Gold gained a tad but did not manage to reclaim its $1,800 level.

Updating the 2008-2009 analog, it appears history is back on schedule for a possible two-peat.  

1. Moving the markets

After last week’s rebound, that resulted in the S&P 500 finally breaking through its 200-day M/A, which has served as a glass ceiling since April, none of that feel good bullish sentiment was present today.

From the opening bell, the major indexes headed south caused by sudden fears that the Fed may not only not pivot but continue its hawkish policies, even as the economy slides further into recession territory.

That took the starch out of any remaining bullish momentum, as the broad market tumbled, including heavyweights like Tesla, Microsoft, and Amazon, with the retreat being broad based and leaving no place to hide.

Rising bond yields supported the equity bears, with the 10-year gaining 7 bps to close at 3.6%. The S&P “lost” its 200-day M/A again, which it had just reclaimed, bringing up the question whether conquering this resistance level was simply a head fake.

Fed whisperer Nick Timiraos appeared to walk back some of the market’s post-Powell exuberance, as ZeroHedge called it, in this morning’s WSJ article, as the “higher rates for longer” narrative was pushed, which caused terminal Fed rate expectations to surge.   

The stand-by and usually reliable bullish ammo failed today, because the most shorted stocks tanked as well, with no bailout squeeze attempt in sight. The US Dollar rebounded, and Gold dropped back below $1,800.

After a temporary bullish diversion, will the S&P 500 now sync up again with the 2008-2009 analog?