…markets drop. This week was a great example when the 10 year yield shot up by 16 basis points almost touching 3.25%. That kicked in the algorithms and we saw a sell-off.
As mentioned in the last blog, a dip was expected around the payroll release date. The average hourly wage growth itself was not inflationary (less than a dime) but the headlines of “lowest” unemployment rate of 3.7% in the last 5 decades was enough to get the Markets juice flowing. With a strong ISM number this week and Powell’s speech that the Fed might overshoot on the rates was enough for the Bears to come out of hibernation. Algorithms got in action and we saw a major sell-off in last two days, especially in the Tech. But where would the money go in a bad neighborhood? As expected, money sitting on the sidelines was put to work by performance chasing Managers and we saw buying as S&P hit 50DMA, Nasdaq hit 100DMA and small cap Russell index hit 200DMA (DMA: Daily Moving Average). Monday is Columbus day and Bond Markets are closed. This should give some respite early next week as the 10 year yield would take a breather but we may see further sell-off in the middle of the next week if Thursday’s CPI number is hot. Markets will speculate further hawkish tone from Powell and sell-off might intensify.
Bottomline, we may experience a roller-coaster ride in the short term, but the drops are not going to be as scary as we saw in the early part of the year. So as the rates pop and Markets drop, it might be a good time to shop. Have a great weekend.