Stocks finished the day lower, with the S&P 500 dropping by roughly 30 bps and the Qs dropping by 80 bps. Small caps rallied, with the Russell jumping by around 1.5%. 10-year yields were up to approximately 1.5% today, which sent the algo’s into overdrive buying the typical reflation names. The problem is that yields are no longer rising because of inflation or more substantial growth expectations. They are rising due to the FOMC meeting and expectations that the Fed will begin the tapering process.
Economic growth has moderated quite a bit, and current estimates call for third-quarter growth of 3.2%, based on the Atlanta Fed model. At this point, given that consensus analysts’ expectations had been for 7% growth when the quarter started, we have to wonder if the slower growth rate has correctly been priced into the market. If not, then this whole dynamic of buying financials, materials, industrials, etc., may not prove to be the correct one.
Yields
We will see if yield can get through the 1.51% region; I am hesitant to say they will. Rates around the globe are very low, and growth rates are moderating. Unless we see an uptick in rates globally, I would be surprised to see the 10-year advance much further. I do happen to think the short end of the curve will rise, which will flatten the curve out.
S&P 500
The S&P 500 is now flirting with support at 4,430. I noted earlier that I believed we had just completed a corrective wave, and the next leg should start once the index falls below 4,430. If that turns out to be correct, then I would take the lows of 4,300.
General Electric
General Electric (NYSE:GE) continued to rocket higher. I noted last week there was some bullish options betting, and the chart looks positive. If it can clear that trend line around $105, I think it will have room to run higher to roughly $115.
Ford
Ford (NYSE:F) is frustrating me; I have no idea why this stock should rally given their production cuts. Yeah, EV’s are great; who cares. EV will cannibalize their ICE) cars, and they will be in the spot they were. Currently, the stock is retesting the uptrend, and we need to see what happens today. If this is just a retest of the breakdown in August, then the stock should start falling; if not, I throw my hands up in frustration.
DocuSign
It looks like DocuSign (NASDAQ:DOCU) broke support yesterday at $270. We will need to see a follow-through today to confirm this breakdown. If the break is really, the stock is probably heading back to $200, and the gap.
