Wall Street Surges Again As Yields Slide
4:04 pm Tuesday, October 04th, 2022
It’s another good day for the bulls. The major indices are all up between 2.5% and 3.6%, leaving them all up more than 5.0% in less than two full trading sessions. The market shot higher at the open, then plateaued, and has moved sideways near session highs for most of the day.
A drop in Treasury yields and a strong showing from mega cap stocks has offered support to the broader market, although Treasuries have moved off their best levels. The 2-yr note yield, which scraped 4.00%, is down one basis point to 4.10% and the 10-yr note yield, which hit 3.56%, is down three basis points to 3.62%. The real driving forces, however, are offsides positioning and a hope that the Fed will soften its rate-hike approach.
A decision by the Reserve Bank of Australia (RBA) to raise its cash rate by only 25 basis points (instead of the expected 50) to 2.60% has fueled hope of a softer path forward for the Fed. RBA officials said that “the cash rate has been increased substantially in a short period of time,” and want to take some time now to assess the impact of prior rate hikes on the outlook for inflation and economic growth.
The US Dollar Index is down sharply today on the growing speculation that the Fed will take a similarly soft approach soon. It’s down 1.2% to 110.37 with EUR/USD +1.4% to 0.9961.
There is a short squeeze taking place in the stock market and maybe even a “flat squeeze” as sidelined investors feel the urge to put sidelined cash back to work after an ugly month of September that left the S&P 500 down 24.8% for the year at Friday’s close.
Broad buying has advancers outpacing decliners by a 9-to-1 margin at the NYSE and a 4-to-1 margin at the Nasdaq.
Every S&P 500 sector trades up with gains that range from 1.1% (consumer staples) to 3.4% (energy). The latter sits atop the leaderboard thanks to rising oil prices, which are responding to reports that OPEC+ will consider a 2 million barrels per day production cut at tomorrow’s meeting versus prior reports of 1 million barrels per day. WTI crude oil futures are up 3.1% to $86.23/bbl.
