The Standard & Poor’s 500, trading at 2015 at 1:30 p.m. on October 9, is within spitting distance of the 2020 level that marked the high point before a hefty decline ended the August and September rallies
The cause of the rally is pretty simple: With the weaker than expected jobs numbers for September the market has adopted the view that the Federal Reserve won’t raise interest rates until March 2016 at the earliest. The possibility of an October interest rate increase is now almost completely off the table as far as the market is concerned
The sectors leading the market slightly lower are those cyclical sectors that have moved up most strongly on strength of U.S. economic growth—including the revision of third quarter growth to 5% rate.
Recent financial market volatility seems closely connected to shifts in expectations about when the Federal Reserve will start to raise interest rates. With the Fed’s Open Market Committee set to provide a press release at 2 p.m. New York time today—but no press conference—the markets are looking at potential grounds for another shift in sentiment
As swell as it is to have the U.S. markets moving up again, I think those analysts who have flagged the potential importance of the high volatility of volatility right now deserve attention.
European stocks rallied on the beginning of asset purchases by the European Central Bank and speculation that the bank would expand its purchases to corporate bonds from the current purchases of covered bonds by December. U.S. stocks are rallying on “good news” that a terrible earnings report and guidance from IBM (IBM) yesterday didn’t tank the market.
So where is the cash headed? It’s coming out of U.S. equities right now and moving to the sidelines. That’s only a temporary destination, however.
A little bit of everything has hit U.S. stocks today. A sell off in momentum stocks is leading the market lower again. That seems partly disappointment that good news from Apple (AAPL) didn’t take the S&P 500 through resistance at 1885 yesterday. Part seems to be disappointment at Amazon.com’s earnings. Part seems to be worry over being long equities over a weekend that could see violence in Ukraine.
