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The Bags Are Still Packed

Posted October 4, 2021 at 9:50 am
Patrick J. O’Hare

Friday’s rebound effort is looking like Friday’s rebound effort — for the time being anyway. Currently, the S&P 500 futures are down eight points and are trading fractionally above fair value, the Nasdaq 100 futures are down 52 points and are trading 0.3% below fair value, and the Dow Jones Industrial Average futures are down 17 points and are trading 0.3% above fair value.

There isn’t a pinpoint reason for the lackluster disposition. There are just some pin pricks that are acting as irritants and making it a bit uncomfortable for buyers to step in with much conviction at this juncture.

  • The continued inability of Democrats to strike a deal on the budget reconciliation package and the continued resistance in the House to holding a vote on the $1.2 trillion bipartisan infrastructure agreement.
  • A knowingness that the stock market has been inclined of late to sell into strength.
  • There are copious reports of supply chain bottlenecks and inflation pressures.
  • A view from Marvell Technology’s (MRVL) CEO that the chip shortage could potentially last through 2022.
  • Continued worries about an energy supply crunch, with the UK, China, and India among the key focal points.
  • The U.S. Trade Representative floating the idea of additional tariffs on China for failure to comply with Phase One of the trade deal.

Alas, there is a mishmash of headlines contributing to a wait-and-see mindset. No one is really sure what today’s tape will show.

Even the Treasury market is acting a little squirrely. The 10-yr note yield moved steadily higher overnight to test 1.50% but is now tracking back toward 1.47%, which is where it settled on Friday.

What’s lacking for trader’s right now is an edge.

The S&P 500 futures are little changed relative to fair value; the 10-yr note yield is little changed; and oil prices are little changed.

There isn’t a strong macro driver this morning. Rather, the feel of the tape is more idiosyncratic.

Tesla (TSLA) is up 3.0% after reporting better than expected Q3 deliveries of 241,300 vehicles; Facebook (FB) is down 0.7% amid a whistle blower complaint that the company prioritized profits over safety; Delta Air Lines (DAL) is up 1.2% after saying it is on track to deliver 30-35% revenue growth in Q3; and Moderna (MRNA) and Novavax (NVAX) are down 4.7% and 5.8%, respectively, as they continue to suffer from the news that Merck (MRK) has an effective oral treatment for COVID-19. Merck for its part is up another 3.9%.

There will be plenty to unpack this week, including the September employment report on Friday. For now, though, the stock market’s bags are still packed, unsure of its ultimate destination after experiencing its worst trip last week since late February.

Originally Posted on October 4, 2021 – The Bags Are Still Packed

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