Saturday, November 23, 2024
We confess that we spend entirely too much time staring into the abyss of the Giant Quote Machine here at World Headquarters—with our morning coffee, perhaps with a drink in the evening. Sometimes, we’ll have a baseball game on one screen, and you know what will be drawing red and green lines on the other. We even have a mini-version of the Giant Quote Machine on our phone when life pulls us away from our desk.
Don’t judge us!
When we see a dramatic move in the markets, we can typically guess the cause, especially when that move comes in the overnight session. Before the opening bell? Well, it’s probably an economic report that was significantly better or worse than expected. After the closing bell? Well, then, it's something on the earnings calendar. If we weren’t expecting it, we can usually figure it out in short order.
At 8:30 am ET, the S&P 500 futures contract, which trades all night, was off a couple of points; by 8:35 it had dropped by over 20 points, and the S&P continued to sell off throughout most of the day.
The reason? Beats the heck out of us!
Stocks opened sharply lower, sold off throughout the day, and closed at or near their lows, as declining stocks led advancers by four-to-one and all of it on sharply higher volume.
Rates were up across the board on Tuesday.
If we had to guess at the proximate cause of yesterday’s sell-off, we suppose we’d lay the blame at the feet of the Employment Cost Index, which was released by the Bureau of Labor Statistics at, you guessed it, 8:30 am ET.
The Employment Cost Index, you say? Yeah, us neither.
Wages, according to this measure, increased by 1.2% in the first quarter, which is higher than expected and a sign that the labor market remains healthy. And perhaps that inflation remains a problem. Although we sure didn’t need some little-known report to tell us that.
At 10:00 AM ET, the Chicago Purchasing Managers Index and the Conference Board’s Consumer Confidence reports both came in well below expectations and certainly didn’t help matters. But typically, these measures don’t impact trading much, if at all.
We think the markets just wanted to go down, and the Employment Cost Index, the Purchasing Manager’s Index, and Consumer Confidence, which seem to contradict each other, were convenient excuses.
Mixed messages on the economy, perhaps, but corporate earnings continue to exceed expectations.
McDonald’s and Starbucks both missed expectations, which isn’t a good sign for consumer spending, but Amazon had a blowout quarter, which is. Mostly green numbers on the earnings screen contrasting sharply with all the red on the markets screen.
A busy day today on the economic calendar, including the JOLTS and the ADP Nonfarm payrolls.
But all eyes, ears, and hearts are focused on the Fed, which finishes up two days of meetings this afternoon. While the Fed always makes news when it meets, and we will be watching, we don’t expect anything of consequence. Rates aren’t going down, but they're not going up. The statement will almost certainly be nearly identical to the last one, and the Dot Plot might be interesting; we think the Fed is petrified of doing or saying anything that might rock the economic boat until more and hopefully better inflation data is released. The next CPI report is due out in two weeks time.
