1. Moving the market

A series of positive data points helped ease traders’ fears that the Fed’s aggressive 0.5% interest rate cut might have been prompted by a slowing economy. This had a positive impact on the major indexes.

While the debate about the Fed’s actions continues, today’s sentiment favored the bulls. Initial weekly jobless claims fell, indicating a positive trend, while Durable Goods orders remained unchanged in August. Additionally, the final reading of the second quarter GDP was not revised, holding steady at 3%.

However, one set of numbers does not establish a trend. Particularly with jobless claims, the monthly figures will provide a clearer picture of market sentiment. Meanwhile, the Citi Economic Surprise Index saw another increase.

This combination of favorable economic news pushed the major indexes higher, with the Nasdaq leading the way. Micron, Applied Materials, and Lam Research were notable contributors, with the latter two gaining a solid 6%.

Central banks appear to be following the Fed’s lead by implementing stimulative measures. China announced fiscal support after earlier monetary measures, resulting in a significant jump in its index. The Swiss National Bank also cut rates by 0.25%, with traders anticipating further cuts in December.

The most shorted stocks rose but lost some momentum as the session progressed. Crude oil fell below the $68 level, while gold hit new intraday highs above $2,700 but couldn’t maintain that level.

Bond yields were mixed, as was the dollar, which gave back some of yesterday’s gains. Bitcoin regained its $65k level for the first time since July. With global liquidity on the rise, this could bode well for the cryptocurrency’s pursuit of new all-time highs, as this chart demonstrates.

1. Moving the market

The markets experienced early volatility due to a sharp drop in the September Consumer Confidence Index, which pressured stocks. However, by the end of the day, the major indexes managed to close moderately higher.

The Consumer Confidence Index fell to 98.7, significantly below the revised August reading of 105.6 and marking its lowest level in three years. Analysts had expected a reading of 104.

Given that consumer activity accounts for approximately 67% of overall economic activity, this decline confirms worsening economic conditions and suggests that we have already entered a recession. This is why the Federal Reserve implemented a more aggressive 0.5% interest rate cut last week, rather than the anticipated 0.25%. To me, their actions represented an emergency measure.

While traders welcomed the Fed’s aggressive stance, I anticipate increased volatility and a potential disruption of the bullish trend in the coming months. Keep an eye on our Trend Tracking Indexes (section 3) for further developments.

China introduced a series of economic stimulus measures, including rate cuts, which positively impacted their stock market. However, the US and European markets showed little reaction.

The dollar weakened, Bloomberg’s Business Cycle Indicator declined sharply, and expectations for three more rate cuts in 2024 increased.

Gold gained 1.36%, approaching the $2,700 level. The most shorted stocks experienced wild swings but ended unchanged, bond yields retreated from mid-session highs, and crude oil recovered from the previous day’s drop.

Bitcoin moved towards $64,000, the upper end of its recent trading range.

With China’s recent monetary stimulus and global liquidity now comparable to the S&P 500, can we expect further upside potential, possibly leading to a blow-off top?

1. Moving the market

The markets continued to build on last week’s rally, driven by the Fed’s 0.5% interest rate cut, the first in four years. Initially, the indexes fluctuated, but the S&P 500 managed a weekly gain of 1.4%, while the Dow reached a new all-time high.

However, the usual array of economic indicators remains a wildcard, potentially derailing hopes for a soft landing, particularly in the labor markets. Additionally, election risks loom large.

Fed President Goolsbee attempted to bolster market sentiment today, stating that the Fed is now able to ease monetary policy aggressively as inflation trends lower. Despite this, the Fed seems unaware that the bulk of inflationary pressures are still ahead. Goolsbee even predicted “a lot” of interest rate cuts over the next year if current economic conditions persist.

The major indexes saw modest gains, but crude oil took a hit for no apparent reason, though it held above the $70 level. Small Caps underperformed, while the Dow and S&P 500 closed at new highs.

Bond yields fluctuated and ended nearly unchanged, the dollar remained flat after an early bounce, gold climbed modestly, and Bitcoin briefly topped $64.5k before returning to its previous level.

Meanwhile, stocks and bonds continue to diverge, making me ponder how long this trend can persist.