Columbus Day is giving equities a reprieve from the bond market, which is closed for the holiday.  However, concerns regarding rising interest rates are still weighing on investors.  The markets’ first rally attempt this morning failed, as the markets struggled to find direction on a quiet day of trading.  Without the bond market, it’s tough for investors worried about interest rates to gauge the action. 

Equites are drifting around with a downside bias, which may be tough to break out of with the lack of volume.   The good news is buyers have showed up twice.  The bad news is major indices are still lower as tech continues to get hammered and money rotates to the sidelines.

Note: This doesn’t change fundamentals, and the Fed shouldn't be swayed by rates that are still historically low.  I think the stock market is overreacting, but it gives weak hands a chance to sell. 

Markets are coming into strong support zones: 26,180/25,965 for the Dow Jones Industrial Average and 2,858/2,800 for the S&P 500.  Yet, investors are getting spooked and buying puts for protection.  The VIX, known as fear index, has been rising steadily all session long as it breaks above resistance @16.  The VIX will rise when investors buy puts to protect their long positions or to bet on a decline in a stock or stock index/etf.  The VIX is currently trading @17.83, up 20%.  A move below 16 on the VIX would be welcome news for equity bulls, as fear subsides. 

On Wednesday, the U.S. Treasury will be issuing $36 billion in 3-year notes and $23 billion in 10-year notes.  The results of that auction will be closely watched for demand.  The 10-year Treasury note yield is on the cusp of breaking out of a pattern dating back to 2014 when the high yield was 3.0%.  The yield briefly broke above that level in May 2018 (3.0%) when it touched 3.11%, but quickly traded back below that 3% before regaining enough momentum to trade up to 3.24% last week.   

Technology, especially software (-3.4%), is pressuring the Nasdaq lower.  Home construction stocks are attempting to put in a bottom as they retested support from August 2017 and are now trading higher for the day.     

• The Dow Jones Industrial Index is lower by 170 points, 0.64%, @ 26,277
• The S&P 500 is lower by 21 points, 0.74%, @ 2,864
• The Nasdaq is lower by 126 points, 1.62%, @ 7,662
• The Russell 2000 is lower by 12 points, 0.75%, @ 1,620

Breadth:

• NYSE decliners 1,794 to advancers of 1,185; new 52-week highs 28 to new lows 283
• Nasdaq decliners 1,998 to advancers 962: new 52-week highs 20 to new lows 184