1. Moving the market

The markets began the second day of October in negative territory, driven by escalating tensions in the Middle East. Despite this, the markets closed relatively unchanged, with China’s recent upward trend continuing, bolstered by their substantial stimulus program.

Nike experienced a significant 7% drop after canceling its full-year guidance ahead of a new CEO’s arrival. Meanwhile, the tech sector lacked direction, with Tesla shares falling over 4% due to disappointing delivery numbers.

Traders currently view these geopolitical tensions as a temporary disruption. However, the potential economic impact could be more severe, especially as the effects of the East Coast port strike become apparent.

On a positive note, ADP data revealed better-than-expected private payroll growth last month, with 143,000 new jobs created compared to the anticipated 125,000. However, this does not guarantee that Friday’s nonfarm payroll report will follow the same trend. The upcoming report could significantly influence the market’s direction and the Federal Reserve’s next interest rate decision.

The MAG7 basket initially slipped but managed to recover, cutting its early losses as bond yields rose. This increase supported the dollar but negatively impacted gold and Bitcoin, with the latter experiencing a more substantial decline.

Crude oil prices fluctuated after yesterday’s rally, as Middle East tensions remained high. Although it was a quiet day in the markets, this could quickly change with the release of the payroll numbers on Friday.

Seasonally, we have entered one of the most volatile periods of the year, with the VIX likely to increase significantly, as indicated in this chart.

1. Moving the market

Escalating tensions in the Middle East have significantly dampened upward momentum, pulling the indexes down from their lofty levels.

Wall Street’s “fear gauge,” the volatility index (VIX), spiked sharply, reflecting traders’ concerns. Historically, fears of contagion have a destabilizing effect on the markets. Early in the day, bond yields plummeted, benefiting gold and utilities. As expected, crude oil prices surged, gaining over 3%.

The tech sector led the decline, with major players like Apple, Tesla, and Nvidia experiencing drops. However, Meta defied the trend, moving closer to its all-time high.

Despite Federal Reserve Chair Powell’s encouraging remarks yesterday about the possibility of two more rate cuts this year, if the economy performs as anticipated, the reality of escalating conflict and the East Coast port strike weighed heavily on the markets, potentially derailing economic conditions.

Bond yields initially fell but managed to recover from their lowest levels, with the 10-year yield dipping below 3.7% at one point. Gold emerged as a “safe haven,” recovering its losses from the previous day.

Despite the drop in yields, the dollar showed significant strength amid global turmoil. Bitcoin, which is often seen as an anti-geopolitical risk asset, failed to hold its ground, and declined, mirroring the downward trend of the MAG7 basket of tech stocks.

Will increased liquidity still be the key factor to push Bitcoin to new all-time highs?

1. Moving the market

The markets experienced a downturn early on the final day of the month. However, sentiment shifted positively following a speech by Federal Reserve Chairman Powell just before the session’s close, leading to a green finish for the major indexes.

August and September began with heightened volatility, but bullish sentiment ultimately prevailed. The S&P 500 closed the month with a 2% gain and added 5.5% for the quarter.

Historically, September is one of the weakest months of the year, and as we move into October, we face a month known for its extreme swings and significant drawdowns.

Nevertheless, traders are optimistic, as the fourth quarter is typically the strongest for equities, ending positively in more than three out of every four years, according to MarketWatch.

In September, the energy sector lagged, while Consumer Discretionary and Utilities led with gains of 6.5% and 5.5%, respectively. Bond yields decreased, and the dollar recorded its third consecutive month of losses, although it remained in a sideways pattern late in the month.

Gold continued to shine, rallying for the seventh month out of the last eight, while oil prices fell for the third straight month. Bitcoin surged, marking its best month since May.

With global liquidity on the rise, both gold and cryptocurrencies are poised for significant gains, potentially breaking out of their recent sideways pattern.