Stock Market Rebound Fails to Hold: Is This the New Normal?
Stock Market Rebound Fails to Hold: Is This the New Normal?
By:Ilya Spivak
US stocks fell to a two-week low as a soggy rebound failed to hold. Is “risk off” the new normal for markets?
- A stock market rebound failed to hold, with prices sliding to a two-week low
- Traders seem to be defaulting to “risk off” mode amid conflicting influences
- Consumer confidence data is up next. Will traders find a way to dislike it?
Stock markets fell apart anew after just a single day’s attempt at a recovery. The bellwether S&P 500 index and the tech-tilted Nasdaq 100 dropped to the lowest levels in two weeks, resuming the downward slide triggered after Federal Reserve Chair Jerome Powell clobbered the markets’ interest rate cut hopes last week.
Selling pressure began to gather earlier in the week but then buyers tried to regain the initiative. That effort has now come unglued. Bitcoin fell alongside shares, underscoring the “risk-off” mood. Treasury bonds stormed higher, seemingly finding appeal as a safe haven asset once again.
Stocks are back under fire as “risk off” sentiment prevails
By contrast, the US dollar faced broad-based selling pressure. It shed 0.37% against an average of major currencies. The Japanese yen outperformed while the Australian dollar recorded a loss, as often happens in broadly defensive markets. Losses against the euro and the British pound hinted at something more, however.
While top-tier US economic data remains absent amid the ongoing government shutdown, a flurry of private-sector figures painted troubling picture. Planned layoffs jumped to 153,074 last month – the highest in seven months – according to Challenger, Gray & Christmas, an executive job placement firm.
The narrative pointed in the opposite direction on the prior day. A service sector gauge from the Institute for Supply Management (ISM) surprised with much faster growth than expected, while a report from HR giant Automatic Data Processing (ADP) said October marked the first rise in private payrolls since July.
Will the markets find a way to dislike US consumer confidence data?
The critical conclusion here seems to be that – as markets parse these conflicting signals – the net result is shaping up to be the biggest weekly loss for headline stock market averages in a month. In other words, as the markets grasp at straws to find their bearings absent familiar data inputs, the default they are finding leads them lower.
Consumer confidence data from the University of Michigan (UofM) will mark the last key test of this emerging dynamic for the week. It is expected to show that sentiment weakened for a fourth consecutive month in November’s survey, despite cooling inflation expectations.
Analytics from Citigroup tracking economic data surprises as well as the closely watched GDPNow model tracking the evolution of economic growth expectations from incoming news-flow hint at upside surprise risk. If markets find a way to spin such as a result into a “risk off” scenario, they may well tip their hand about what is coming next.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
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