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Stocks Rally Back Despite Rising Rates And Stronger U.S. Dollar

By Michael KramerStock MarketsOct 06, 2022 04:12AM ET
www.investing.com/analysis/stocks-rally-back-despite-rising-rates-and-stronger-us-dollar-200630712
Stocks Rally Back Despite Rising Rates And Stronger U.S. Dollar
By Michael Kramer   |  Oct 06, 2022 04:12AM ET
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Sort of a strange day, with markets moving lower to start the day as rates and the dollar increased. The better-than-expected ISM data added to the downturn. Then after the European market close, the dollar started to give back, and the S&P 500 moved off the lows and finished down just 20 bps, despite being down more than 1.6%.

From a technical standpoint, nothing much changed when the S&P 500 gapped lower and filled the gap. The jobs data on Friday is going to decide the next leg of the market, and after reviewing the ISM data, and after Brain Deese said the labor market is showing resilience with some cooling; there is a good chance, I think, the job number comes in better than expected. The ISM services employment index shows that in the last couple of months, the ISM employment index has improved, making me wonder if the job report comes in hotter than the forecasted 260,000.

If you push that ISM employment index back a month, you can see the changes in the employment index are pretty good at predicting the direction of the change in the BLS job report and that the ISM employment index has risen steadily for the past three months. It is worth thinking about, and if that is the case, then the move higher in rates and the dollar today is only the start.

BLS Job Report
BLS Job Report

From a technical point of view, nothing changed on the S&P 500. The resistance level at 3806 held, and the big move up mid-day came on minimal volume from what I can tell.

S&P 500 Futures Chart
S&P 500 Futures Chart

2-Year

The 2-year has consolidated around 4.15 to 4.25% level and could be in a bull flag, suggesting the next move up the 2-yr could be significant and perhaps push it to that 4.6% rate.

US 2-Yr Yield Chart
US 2-Yr Yield Chart

ARKK ETF

Meanwhile, ARK Innovation ETF (NYSE:ARKK) is trending down and has an RSI that is trending lower, and the two suggest that ARKK is in a solid downtrend. If the ETF is falling out a bear flag from the mid-August peak, it simply hasn’t fallen enough to suggest it has bottomed.

ARKK ETF Daily Chart
ARKK ETF Daily Chart

Tesla

Tesla (NASDAQ:TSLA) is probably going to be a drag on ARKK down too, with the news that Musk will go through with the Twitter (NYSE:TWTR) deal. Support for Tesla is still a bit lower at $224.

Tesla Inc 1-Hr Chart
Tesla Inc 1-Hr Chart

Biotech

Finally, it looks like a bear flag has formed in the SPDR® S&P Biotech ETF (NYSE:XBI), which could make sense if rates start to move. This sector has been one of the more sensitive sectors when it comes to rising rates.

XBI 1-Hr Chart
XBI 1-Hr Chart

Original Post

Stocks Rally Back Despite Rising Rates And Stronger U.S. Dollar
 

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Stocks Rally Back Despite Rising Rates And Stronger U.S. Dollar

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Comments (8)
Kris Jay
Kris Jay Oct 06, 2022 9:55AM ET
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THank you Kramer for the analysis.  Still the stocks will go up even on 20,000 change in jobless claims.  "It's over, fed will pause because ....."
David Beckham
David Beckham Oct 06, 2022 9:18AM ET
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This is just stupid rally easy short
David Beckham
David Beckham Oct 06, 2022 9:18AM ET
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Ok let’s follow Kramer easy short
Mario tragik
Mario tragik Oct 06, 2022 8:26AM ET
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Sigh ..these stupid rallies I tell you ..
jason xx
jason xx Oct 06, 2022 8:01AM ET
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Apparently in your flawless assessments you've failed to realize how much push back the fed is getting about their reckless rate hikes. Not only the UN and political leaders everywhere but now even opec blaming their cuts on the feds aggressive intrest rate hikes. Smart money knows the puase is coming.
Kris Jay
Kris Jay Oct 06, 2022 8:01AM ET
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the Fed governors keep tellign you in their communications to the media that a pause is not going to happen.  UN has no say in anything so it doesnt matter.
Stan Flation
Stan Flation Oct 06, 2022 5:43AM ET
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Every 2-3 months (june, july) appears some FED-PIVOT narratives that makes the mechanical bull walks. Although economy is in very good shape in US, perhaps is in his peak, decreasing inflation will probably hurt enterprise inflated revenues and historical high margins, meanwhile FED hikes probably will hurt financial stability. Hard times to be a bull, hard times to be a bear (except for the very patient bears).
David Beckham
David Beckham Oct 06, 2022 5:29AM ET
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All in short
Peter ONeill
Peter ONeill Oct 06, 2022 5:01AM ET
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Still far too much money on the sides due to Fed printing presses - all waiting for dips to invest - as otherwise cash is being eaten by high inflation. Yet it is this cash supply causing that inflation. I think this money supply will keep the market still pumped up until next year - when Interest Rate hikes burn into speculative margin debt + fed balance sheet sell-offs will see the market finally at more realistic/fair levels. I cant see many companies maintaining revenue at 2020-2022 QE-induced levels in 2023, so the market will need to pivot to more justified PE ratio levels. Any companies still performing will be dragged down by the wider market but at lower % falls
Gil Montana
Gil Montana Oct 06, 2022 5:01AM ET
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Thank you very much for all your comments, Mr ONeill
 
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