The equity market dropped on Monday, but the general progress of October has been good. The Dow had closed to achieve the best-performing October since 1976.
Market participants are setting aside the upcoming FOMC meeting for a hint on the path of interest rate trajectory. There is also growing concerned about inflation in the Eurozone area, which had increased by 10.7% yearly for October. It is a record and is pushing the German 2-year government bond yield to 1.942%, and its counterpart, the US Treasury yield for 2-year rose to 4.499%.
Similar to the Fed, the ECB is fighting inflation. Yet market participants are now in a better mood, for they felt that the market is pricing in a possible discussion on the possibility of slowing down rate hike. After all, the lag time between the effect of a monetary tightening policy and its real impact on the economy has been the paramount concern of many FOMC members. It’s good news for investors as it could hint a more cautious stance by FOMC members to tone down the narrative for large hikes in the future.
📮What’s on the menu today?📖
At 9.45 pm, we will have the Manufacturing PMI for October. It should register a contraction level of 49.9, similar to the prior period.
ISM Manufacturing PMI will be released at 10 pm. We are likely to see a slowdown to 50.0 from 50.9.
At the same time, the JOLTs Job Opening for September should remain strong at 10.0M, comparable to the prior period of 10.053M. This data is vital as the continued robust job market has given the Fed a boost to pursue aggressive rate hikes, given the assumption that the labour market is still healthy.
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All is well.