Hi Everyone,
Despite the afternoon weakness in stocks, nearly all of the main sectors closed the day in the green, with especially energy-related issues, tech stocks, and the healthcare sector enjoying inflows. Cyclical issues were mixed, as industrials, financials, and materials failed to join the rally in the energy sector. Consumer-related issues were weaker than the large-cap benchmarks as well, and the most virus-sensitive industries lagged the broader market too, despite showing encouraging strength yesterday.
Traders said that today’s directionless session might already be part of the bottoming process following Monday’s “mini-crash.” As one trader explained, “While the looming Fed announcements definitely contributed to today’s rather choppy session, the fact that the major indices remained well above their pullback lows is a positive sign for the rest of the week.”
Global risk assets had a promising day following yesterday’s broad-based selloff, with European and Asian stocks rising in tandem in the face of the contagion fears in China. Even copper, which has been hit hard by the Chinese credit woes, bounced back this afternoon, which could mean that the “Evergrande-dip” will soon be over. Interestingly, the most popular cryptocurrencies all hit multi-month lows this week amid the intensifying regulatory fears, and since bitcoin and its peers failed to bounce back today, those companies most exposed to the sector could be in for more trouble.
Although a rate hike for the Fed would be more than shocking, the uncertainty regarding the Central Bank’s monetary statement is unusually high. Given that the European Central Bank (ECB) already started tapering its asset purchases, the Fed might outline the withdrawal of some of its emergency measures as well, even in the face of this week’s risk-off shift. Most analysts expect the Fed’s tightening process to kick off in November. In the case of a formal announcement, the consensus calls for a tapering of $15 billion per monetary meeting. At that pace, the current $130 billion per month quantitative easing program (QE) would be concluded by next summer.
“Life, like a mirror, never gives back more than we put into it.”
Anon
As always, have a great evening and stay tuned!!
