Investors continue to tread carefully in this market, and with a datapoint that is on everyone’s calendar tomorrow, the tape felt cautious. Yes, every sector closed in the green, as did the indexes, but volume was light for September and sector performance was relatively bunched. Inflation has been drilled into everyone’s brain and with a Fed that is intent on taming it, CPI will remain important. Tuesday’s reading is expected to show a headline that is sequentially lower, while core higher (y/y). That juxtaposition shows the difficulty the Fed has in the quest, and why the Street (and most Fed heads) expect a 75bp hike next week. Lipper data last week showed continued outflow from equities (about $21bn over the last two weeks) and that positioning has led to four days of gains for the S&P 500 and Nasdaq. Investors are still bearish, but at some point the selling stalls, and equities rise. Apple (AAPL +3.8%) helped Technology (3.3%) outperform post their first weekend of pre-ordering the new iPhone, and Energy (+1.8%) followed Crude’s +1.5% bounce. Semis lagged slightly (SOX +34bps) as Washington is expected to announce a limit on chip exports to China later this month. As equities are seeing limited love from investors, the Dollar is the opposite. But similar to stocks, the Dollar (DXY down 64bps) saw some position paring ahead of tomorrow. Lastly, the move in equities usually comes in tandem with Treasuries. The 10-yr yield started to improve upon Friday’s close, but the US auctioned $41bn of 3-yr notes plus $38bn in 10-yrs, and that latter auction was met with tepid demand. Bid to cover was 2.37 versus the previous 12 average of 2.48, and indirect participation was only 62.3% (vs 68.9%). Post the 1pm auction, yields moved to 3.36% from the pre-auction 3.3%. Tomorrow’s trading direction will start at 8:30, and traders will not hear any rebuttal to those datapoints since the Fed is in their quiet period. Equities have had a nice bounce since September 6th, but many think this is just another bear rally. Could the broader indexes have another plan up their sleeve?
The content on this site is available to all Redburn clients as part of Redburn Execution’s standard service. It is not considered substantive research and there are no commercial implications to viewing these pages.
Please enter your email address below to view this page. If you are still unable to access the page, please speak to your account manager.