Buyers still holding back

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Chief Market Analyst

Last week ended on a disappointing note with broad-based selling kicking in to knock the S&P 500 and Nasdaq Composite back below their 50-day moving averages. In the process, the selling also knocked the S&P 500 and Nasdaq Composite into negative territory for the week.

This occurred as interest rates and oil prices continued to rise, and as mega-cap stocks fell prone to selling interest. The same is happening this morning.

The 2-yr note yield is up three basis points to 5.07% and the 10-yr note yield is up three basis points to 4.35%. WTI crude futures are up 1.2% to $91.85 per barrel.

Those aren’t big moves, yet they are part of a larger move that has unfolded in recent weeks, so each tick adds to the pressure that is weighing on investor sentiment and holding back the equity market.

Currently, the S&P 500 futures are down two points and are trading 0.1% below fair value, the Nasdaq 100 futures are down 32 points and are trading 0.3% below fair value, and the Dow Jones Industrial Average futures are down two points and are trading 0.1% below fair value.

The futures trade connotes a lack of conviction, which is understandable.

Participants are waiting to see how the market responds to Friday’s sell-off and they are cognizant that a market-moving catalyst awaits on Wednesday. That would be the FOMC meeting.

The catalyst won’t be the policy decision itself. The market sees it as a given at this point that the Fed will hold the target range for the fed funds rate steady at 5.25-5.50%. The catalyst will be the updated Summary of Economic Projections and dot plot, and what they confer about the expected policy path.

In the meantime, today’s news flow isn’t driving much trading interest in the early going.

The UAW strike persists, which is not a surprise. Reports indicate that Stellantis (STLA) presented an offer to raise pay by nearly 21% over the contract term, with an immediate 10% pay increase, and that its offer has been rejected as insufficient by UAW head Shawn Fain.

House Republicans, meanwhile, presented a bill that would keep the government funded through October 31. According to CNBC, the bill calls for an 8% cut in domestic spending and stricter border security measures, yet the approach here is being labeled dead on arrival in the Democrat-led Senate.

Originally Posted September 18, 2023 – Buyers still holding back

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