[Chart courtesy of MarketWatch.com]

1. Moving the markets

Friday’s ramp-a-thon did not carry through into this morning’s opening, as the major indexes dipped into the red. However, that move was quickly reversed, as equities recovered to close in the green led by the Nasdaq, which registered its fourth consecutive day of gains. The laggard was the Dow, which ended up hugging its unchanged line.

Market support came from optimism of a continuing strong earnings season from major companies such as Netflix, IBM, Verizon, and Tesla. As FactSet reports, 41 of the S&P 500 components have reported Q3 results with 80% of them exceeding EPS expectations.

However, not all news was encouraging with China’s meager 4.9% annual GDP growth for Q3 vs. expectations of 5.2% creating disappointment. Then we learned that US Industrial Production declined in September due to supply constraints. Not helping matters either were spiking bond yields with the 10-year at one point reaching the 1.62% level before easing into the close.

None of these events pulled the markets down, and it seemed that the “feel good” sentiment from last week’s lift-a-thon was still firmly engrained in traders’ minds.

The US Dollar rode the rollercoaster and ended the session about unchanged, while Gold was stuck in a sideways pattern and went nowhere.

Given last week’s strong Friday finish, which easily could have resulted in a Monday sell-off, today’s market action was positive, a condition which may carry on, should the next set of quarterly report cards be in line with recent ones.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Two of the three major indexes found themselves in an early hole, but late session bullishness reversed the initial trend and assured a steady upward climb. The Dow reached its unchanged line, the S&P 500 ended up with moderate gains, but the Nasdaq bounced in the green all day and produced a solid advance of 0.73%.

The 3-day losing streak is now in the rearview mirror with some support coming from the widely analyzed FOMC report, which showed that the Central Bank could begin tapering its asset-purchase program as soon as by the middle of November:

Participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate,” the minutes said.

No surprises there, so traders focused on the CPI numbers. The index jumped 0.4% in September from the prior month and 5.4% year over year vs. expectations of 0.3% or an annualized rate of 5.3%. Of course, one analyst could not help himself by stating that most of these inflationary pressures are transitory. Yeah right.

The US Dollar dipped and ripped and then lost all momentum and closed down -0.51%, joined by 10-year bond yields, which also showed weakness. This combination, coupled with continued uncertainty, proved to be a boon for gold with the precious metal roaring towards its $1,800 level and gaining almost 2%.

Despite the rebound supported by dip buyers, there is one segment of the markets that still does not participate, as Bloomberg shows in this chart. Makes me wonder why…

[Chart courtesy of MarketWatch.com]

1. Moving the markets

It had to happen eventually, and today was the day when Atlanta Fed President Bostic finally broke away from the common theme, and confirmed what I have been saying all year:

Price surges caused by supply-chain disruptions, or the reopening of the services sector are likely to last, i.e., they are not transitory, and seem to be broadening to more parts of the economy, i.e., getting worse.

In other words, inflation will be with us and will not be of a transitory nature. While other Fed officials are singing a different tune, I would not be surprised if they adopt this type of narrative—eventually.

The markets continued to be affected by volatility, and the result was sloppy and choppy trading, with dip buyers finding no reason to step in and clean up this mess. With a key inflation reading (CPI) ahead of us, as well as retails sales numbers, and the earnings season on deck, the major indexes slid for the third straight session.

Adding to this uncertainty is Wednesday’s release of the minutes from September’s FOMC meeting, which will be dissected for any clues about the Central Bank’s plans to reduce easy monetary policy.

Headwinds abound, and traders are looking for directional guidance wherever they can find it, with slower economic growth ahead being a major threat.

During this session, the US Dollar ended up a tad, as 10-year bond yields slipped to 1.573%, which allowed Gold to edge higher by a moderate 0.32%. While this day was volatile, it was quiet with tight trading ranges prevailing across the indexes, but this will likely change given the variety of upcoming events.