The market made a very impressive move yesterday, catching almost everyone flatfooted.  Although last week, the market finished oversold, the question was what could brake the fall.  There are a number of events this week that could change the economic narrative on a dime.  So, were buyers yesterday ‘smart money,’ or raw speculators taking a shot?

I tend to lean toward ‘smart money.’

This is a bet the Fed won’t hike, and the jobs report will not be a positive surprise.  These are logical assumptions, but logic and the market haven’t been on the same page lately. Moreover, we never assume.

Heat Map

That was a mighty session – barely red, although Tesla (TSLA) stood out like a sore thumb.  Energy stocks were higher on lower oil.

Market Breadth

Very impressive and very encouraging change in breath from last week.

Have Yields Peaked?

The Ten-Year yield is still hoovering below 5.00%.  At some point, the lack of a move higher will invite a pullback.  The critical test is 4.50%.

Government’s Insatiable Spending

Great News, the government only issued $776 billion in bonds in the quarter. There were suggestions of more than $1.0 trillion.

Buckle Up, the Data Starts to Come In a lot Faster.

Today’s Session

Futures are pointing to a higher open extending yesterday’s huge gains, but some of the air is coming out of the market. Adding pressure is earnings from big names such as Caterpillar (CAT), which beat but gave soft guidance.  Others disappointing include Amgen (AMGN), JetBlue (JET) and Pfizer (PFE).

 The S&P 500 and the Nasdaq are set to post three consecutive months of declines. The S&P 500 is currently down about 2.8% in October, the Nasdaq has lost roughly 3% and the Dow 1.7%.

The good news is November is historically the best month for stocks.

The 10-year yield is ticking down this morning. Investors are betting that the Fed meeting tomorrow will yield no increase and Powell will ratchet down his rhetoric.

 

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