The worst sell-off in stocks and bonds this year has calmed somewhat after concerns about “higher interest rates for longer” spooked investors and pushed stocks to their lowest levels in months.
U.S. stocks point to a slightly higher opening (+0.25%-0.50%), also benefiting from slightly lower yields and the sell-off that has already hit key levels that can only be overcome with additional convincing. The Dow Jones is below the 200-day moving average, which is considered a strong technical signal that the markets are oversold.
On a rather quiet day, but ahead of important inflation data from the Eurozone, volatility is also down today. The Cboe Volatility Index or VIX (often called the “fear index”) declined after reaching its highest level since May.
Similar to yesterday, U.S. Treasury yields also fell after reaching a 16-year high, triggered by speculation that the Federal Reserve will stay near current levels until the end of 2024 or longer. However, the USD remains near its highest level against its peers, showing that investors still view the Fed as more hawkish than other central banks.
The stabilization has also halted the recent correction in oil prices, which was not fundamentally based. We expect oil prices to rise again, with the price of U.S. crude oil having risen to $92/barrel and showing strong signs of further increases.
The risk factors all remain fully intact and oil prices continue their upward trend, increasing inflation concerns.
The looming real estate crisis in China remains a strong fear factor for Chinese markets. German sentiment data shows that German consumers are extremely pessimistic (even worse than expected). An indicator of consumer sentiment in the U.S. fell to 103 from 108.7 in August (reported yesterday), missing the median estimate of 105.5, also showing that sentiment in the U.S. is deteriorating – but from a still healthy level.
We will see markets stabilizing today, but there are no fundamental reasons to expect a sustained rally. We expect more losses to come in upcoming sessions.
👁 ROB'S MARKET OVERVIEW:
September 27, 2023
🇺🇸 US Markets ↗️/➡️ (slight “recovery” gains – then sideways movement)
Cyclical Stocks ↗️/➡️
Tech/Growth Stocks ↗️/➡️
Financial Stocks ↗️ (ending the day likely higher)
Defensive Stocks ➡️/↗️ (benefiting from ongoing rotation growth to defensive)
Energy Stocks ↗️
Materials Stocks ↗️/➡️
USD ↗️/➡️ (remains bullish – today mostly sideways movement)
CAD ➡️/↗️ (benefiting from bullish oil prices)
EUR, GBP ➡️/↗️ (slightly oversold short-term)
AUD, CHF ➡️/↘️
⚒ Commodity Markets ↕️
Oil prices ↗️ (oil finally back in bullish price channel again)
Natural Gas prices ↗️
Metal prices ↕️/↘️
Precious Metal prices ➡️/↘️ (high yields + strong USD weigh on attractiveness of gold)
⚡️Cryptos ↗️/➡️ (benefiting from temporarily improved sentiment and recent losses; cryptos remain unattractive for investors)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)