1. Moving the markets

The major indexes managed to pull themselves out of on early hole, caused by a continued rise in bond yields, which eased later in the session thereby giving a much-needed comeback to the equity spectrum.

It looks like the renomination of Fed chief Powell, accompanied by a spike in yields, finally found some acceptance by Wall Street traders and therefore helped to cool the levitation. The 10-year traded above the 1.68% level this week but dipped down to close at 1.64%, while the 30-year tumbled back below 2%.

On the economic front, we were faced with the following headlines:

• New Home Sales Data Suffers Huge Downward Revisions, Inventories Hit 13-Year-High
• Fed’s Favorite Inflation Indicator At 30-Year-High As Savings Rate Plunges To Pre-COVID Levels
• US Durable Goods Orders Unexpectedly Suffer First Back-To-Back Drop Since April 2020
• The Number Of Americans Filing For First-Time Jobless Benefits Was The Lowest Since 1969 Last Week

Only the last one was a positive, while all others indicated nothing more than a sputtering economy. If this trend continues, it will be just a matter of time until the dreaded “S” word, as in Stagflation, will make itself known again.

The US Dollar pumped early on and closed higher by 0.35% but slipped off its high. It has now pierced the September 2020 glass ceiling and hovers at its highest since July 2020, as Zero Hedge pointed out.

With yields and dollars climbing, it was surprising to see gold hold steady with the precious metal adding a scant 0.27% but remaining below its $1,800 level.

As posted Monday, this Friday will be a shortened trading session, and will not write a commentary. However, I will post Saturday’s “ETFs on the Cutline” report.

In the meantime, I hope you’ll enjoy the Thanksgiving Holiday.

1. Moving the markets

Market stress made itself felt again with the Nasdaq getting hammered early on, but the index managed to cut its losses and only surrendered 0.50%, though the Dow and S&P 500 eked out some moderate gains.

Rising rates continued to put strain on the tech segment, although financials again benefitted with XLF adding 1.47% confirming a divided market today. The tech and growth sector have come under selling pressure due to the renomination of Powell as Fed chair, as he tends to represent more hawkishness than his competing counterpart Brainard, who is known to be more dovish.

The joke of the day was Biden’s announcement of tapping into the Strategic Petroleum Reserve (SPR) to take pressure of constantly rising energy prices with the idea that this action would lower them. Apparently, the markets did not get the memo, as crude oil did exactly the opposite, namely spike sharply.

ZeroHedge called it this way:

And most notably, his actions today, sending prices for crude higher, will negate the impact of the drop in crude and wholesale gasoline prices that would bring pump prices lower. Simply put, the president is lying when he talks about retailers gouging – and given his lack of actual business experience, seems to have no idea how the supply chain from crude to gasoline works…

Ouch!

The 10-year bond yield catapulted higher by 14 basis points to end the day at 1.678%, a number last seen in October 2020. Therefore, just as yesterday, the US Dollar followed suit and is now heading towards its recent high set in September 2020.

That type of action pulled the rug out from under gold’s recent rally with the precious metal giving up 0.9% and, in the process, losing its $1,800 level—again.

1. Moving the markets

An early rally, supported by Biden’s announcement that he would renominate current Fed chair Powell to continue leading the Federal Reserve over Fed governor Brainard, a more dovish choice, reversed and turned into a puke-a-thon.

MarketWatch explained:

Powell, a former private equity executive, slashed interest rates to near zero and implemented emergency asset purchases in March 2020 to help backstop the market during the first wave of the Covid-19 pandemic, helping the financial system to remain operational during a sharp slowdown in economic activity.

For sure, any change in leadership might have upset worried traders given the volatile environment this country’s economy is in when considering the emergence from Covid as well as inflation levels not seen in some three decades. So, continuity of the known, despite many open questions, appears to be better than changing to an unknown.

After the announcement, bond yields shot up, which took the starch out of a solid rally with the Nasdaq puking the most and heading into the red losing 1.26%. Bank stocks were the beneficiary of higher rates causing the financial sector (XLF) to gain a solid 1.41%.

Even a mid-day short squeeze could not save the major indexes from diving, however, the Dow managed to cling to its unchanged line.

The 10-year yield ripped higher by almost 8 basis point and ended the session at 1.629% with the US Dollar index in hot pursuit and adding 0.5% for the session. That took all upward momentum out of gold, with the precious metal being clubbed and giving back 2.48% but hanging on to its $1,800 level.

It was only a moderate pullback for the indexes, however, when looking under the hood at some prime stocks, the picture turns ugly, as this table by ZeroHedge shows.

It was a session mired in uncertainty ahead of the Thanksgiving Holiday when markets will be closed. On Friday, it will be a short session, and I will not write a market commentary but will prepare Saturday’s “ETFs on the Cutline” and post it on that day.  

1. Moving the markets

The bulls took a breather today and lost a tug-of-war pitting a continuation of strong earnings against persistent inflation anxieties. At least for this day, the dip buyers were conspicuously absent causing the major indexes to give back some of their recent gains.

For the week, the Nasdaq has been sprinting ahead with the Dow and S&P lagging, as supply chain issues and labor shortages remain on traders’ minds, which seems to affect the bullish theme but only on a temporary basis.

SmallCaps got spanked, and “Value” followed suit by getting hit hard relative to “Growth.” In a way, bond yields saved the day by retreating with the 30-year dropping below the 2% level, a retracement similar to the US Dollar, which corrected a scant 0.12%.

Gold, while pulling back into the close, continued its ascent towards the $1,900 level by gaining 0.80% and was one of the few ‘green’ closes we saw today.

I will be out tomorrow but will return on Friday to write that day’s market commentary.