Stocks were down across the board yesterday due to a rise in bond yields, and the dollar is the recent culprit that created selling in all exchanges. This is healthy for the market. The selling was not heavy and below the average daily volume on both the NASDAQ and S&P 500. Often it is noticeable what type of selling is occurring. In the current case, the last few days’ markets opened lower and continued lower until the afternoon, then buying came in, closing off the lows of the day. This indicates to me the institutions are buying the dip. What is going on is most likely the cloudy days I have anticipated before the election. If you have favorite stocks you have been wanting to buy, now might be the opportunity you have been looking for. The markets are currently trading off the dollar and bond yields (10-year Treasury). The dollar or Treasury yields will not get a chance to reverse that course in earnest until next week’s PCS deflator comes out. (Wednesday) This is the Federal Reserve’s favorite gauge of inflation. I think inflation is a past conversation. (But current pundits want to scare you.) The trend on inflation is lower, although a bump or 2 along the way is to be expected. Let’s hope there isn’t a bump on Wednesday. If a bump occurs, this may deter the Federal Reserve from lowering interest rates by ¼ of a percent in November. The market is expecting a rate cut; anything less would be a disappointment. The markets do like disappointments.
As is noticeable by the chart, yields have headed higher over the past 5 days. We as investors do not want to see this yield close above the 43.40 level. A close above that level might create real selling. What is best for stocks in the near term are yields moving lower?
As is noticeable by the chart, the dollar has been moving higher the past month. A close price over 105 would have a negative short-term effect on the markets. Current market conditions want to see a weaker dollar, not a stronger dollar. When the dollar is moving lower, it normally means lower interest rates. A strong dollar isn’t always conducive to a higher stock market.
Upstart
Upstart was down big yesterday. It’s no big deal and certainly nerve-racking. The volume was extremely light, which left me with little concern. It traded like I thought it would with the current market.