[Chart courtesy of MarketWatch.com]

1. Moving the markets

After the close yesterday, Walmart came out and cut its earnings forecast, which pulled all retailers lower in the afterhours trading session, as fears mounted that consumer spending, or rather the lack thereof, will now not be the driver to keep the U.S. out of a recession.

That sour mood carried into today’s red opening and worsened as the day went on with the major indexes closing broadly lower. The effect was that earnings expectations have been tempered with comments being of a cautionary nature, as the true effect of inflation has still to be recognized on a corporate level.

Markets received no directional help, because the always reliable short squeeze was conspicuously absent, as plunging New Home Sales, sagging of homebuilder confidence and record low affordability made their presence felt.   

Bond yields rose moderately, the US Dollar bounced, while gold slipped a tad but held on to its $1,700 level. Natural Gas surged to 14-year highs, but Crude Oil slipped back towards the $95 level.   

As I am writing this afterhours, Microsoft just released its quarterly report card, which showed top- and bottom-line misses. The stock is currently down some 5%, which may not bode well for Wednesday’s opening.  

Tomorrow, however, the Fed’s announcement on interest rates will determine market direction.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The major indexes fluttered throughout the session with no clear direction, because traders prepared themselves for the big events later this week. The next 4 trading days will be the busiest, as about one third of the S&P 500 members are scheduled to release their earnings reports.

The Fed will be on deck Wednesday with the world watching its decision on interest rates, or more specifically whether they will hike 75 or 100 bps. As important will be their outlook as to whether a moderate tone towards future hikes will prevail.

To top it off, Thursday’s GDP report will likely show a second consecutive quarter of declines, which means we will have officially entered recession territory, no matter how much the current administration is trying to move the goalposts via a new definition of what a recession is. For clarity, ZeroHedge posted this tongue in cheek comparison.

Bond yields rose moderately, but the 10-year remained below its psychologically important 3% level. The US Dollar dipped, as did gold, but Crude Oil bucked the trend, edged higher yet stayed below its $100 threshold.   

It promises to be a weak where anything is possible in terms of market direction.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Despite and early sell-off, the major indexes found some footing, wobbled all day yet managed to produce another green close for the second straight day.

It was a tug-of-war between those traders who were scouring the latest corporate earnings for indications that profits remain on an upward trend, which would support higher stock prices in the future.

On the other hand, worries persist that market sentiment may be in limbo, until we get more clarity on a variety of high-profile issues, like the outlook for the economy, future Central Bank interest rate policy and the ever-present political battles with all its uncertainties.

Even ugly housing data and demand destruction in the energy sector, as ZH described it, were not able to put a damper on equities which, with the help of a short squeeze, although with less conviction than yesterday, managed to provide the impetus for keep the rally going.

Bond yields inched up a tad and held the 10-year above its 3% level. Italy was in the limelight with their government collapsing, as their yields spiked to 3-week highs. The US Dollar rebounded a tad, after getting hammered over the past 7 days.

A big sell program in Europe did damage to Gold with the precious metal losing its $1,700 marker.

Uncertainty reigns, with Sam Stovall, chief investment strategist at CFRA Research, singing the same tune as I did yesterday:

History says, but does not guarantee, that yesterday was more likely a bear market bounce than the start of a new bull market.

Only time will tell.