1. Moving the markets

An early rally hit the skids with the major indexes giving back all their substantial initial gains. The exception was the Nasdaq, which managed to end up fractionally above its unchanged line.

Contributing to this sudden transformation in sentiment were the same old standbys, as Covid variants and slowing economic growth overwhelmed strong earnings reports.

The dead giveaway, that the economy is not all it can be, became obvious as bond yields tumbled just as they did last week when the same issues surfaced. The 10-year crashed to the 1.15% level before rebounding into the close.

The cause of this sudden change of heart, was the Manufacturing ISM survey, the index of which fell to its lowest in 2021, with the “soft” data now starting to catch “down” to hard data’s reality, as ZeroHedge put it.

That created havoc in the bond and stock markets, the latter of which were spooked some more after the Fed’s Waller warned in the last hour that good jobs data reports could move the timetable for the Fed by possibly “tapering early and fast.” To traders that means the punchbowl of easy money could be endangered, so stocks dumped off their early highs.

In the end, it was only this morning’s unrealized gains that were given back, as the major indexes barely crossed their unchanged lines into the red. Whether this is a harbinger of things to come remains to be seen.

The US Dollar index went the other way by selling off early on but rallying back into the close. Despite this chaotic back and forth, gold managed to come back from an early pullback and ended unchanged.

To make it easier for you to follow my various blog posts, you can view the current schedule here.

1. Moving the markets

Despite an initial jump after the Fed’s dovish FOMC statement, during which Fed head Powell hinted that “substantial further progress” would be necessary before any type of tapering, hiking, or tightening would occur, markets slumped. He was referring to stronger job numbers and advances towards maximum employment. Strangely enough, the Fed did not appear to be worried about soaring inflation. Go figure…

The markets ripped while the US dollar dipped after the announcement, but apparently the bullish impact proved to be ephemeral, with the major indexes giving up their gains and ending just about unchanged. The exception was the Nasdaq, which held on to its advances.

The tech assist came from Alphabet, which posted good quarterly results with especially its advertising revenue jumping 69%. Also helping the tech sector was a rebound in the Chinese markets after 3 days of relentless pounding.

A short squeeze aided traders as well, but in the end only a select few managed to post green numbers. Small Caps (VBK) took the lead with a 1.42% gain, while “value” just about broke even.

Bond yields popped and dropped with the 10-year ending the session unchanged, when the Fed’s early hawkish interpretation turning into a dovish one thereby sending bonds on another roller coaster ride.

Finally, the collapsing US Dollar, and a sideways trending bond market, pushed Gold higher and back above its $1,800 level via a 0.50% gain for the GLD ETF.

And, if Bloomberg’s post-FOMC pump pattern, as presented by Zero Hedge, remains true, we are in for a correction followed by another run higher, as this chart demonstrates. Unless, of course, seasonal weakness sets in.