Economy

We are back with a bounce.

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The equity market rose decisively on Monday, although the Nasdaq had a jitter in early trading hours, swinging between losses and gains. It comes after a rough Friday and a day without significant economic data.

The Dow took the lead and rallied 1.2%, clocking the best day since 15 June. The S&P 500 also jumped 0.9%, while the Nasdaq Composite was up 0.6%.

The S&P 500 outpaced Nasdaq during the trading day.

Indeed, given that the Nasdaq has had a good run thus far, the S&P 500 appears to do some catch-up. However, we do see some choppiness, especially for August and September. It could be a month where laggards can outshine while the leadership stocks take a breather and break.

On the earnings front, we are doing pretty fine. Most companies issued better-than-expected results, largely attributed to massive cost-cutting measures that improve margins. This is instead of the usual strong growth seen during the market rise.

Calmness is set to stir on Thursday.

As we had advised members in our Live Market Update channel, do expect more swings and volatility as we approach CPI Thursday. The market seems to be taking the current peace as a display of complacency.

So, stay light as always (I always remind myself but failed to do it, yet I hope you do so) as we look for clues on the inflation development in the economy.

If you observe, traders tend to be on a hold mentality during periods leading up to important economic data, and if the weekends are without fanfare, it tends to sell off in a later Friday session.

Treasury yields are wild cards, be prepared.

Despite the market remaining steady even as Treasury seems to see yield rising, we remain cautious of a sudden spike in volatility as new issuances flood the market. This might cause occasional large swings and drops.

We have seen such large movement lately in Nasdaq and are mindful of such effects from recurring in times of few catalysts such as earning, corporate actions or economic data.

It is 8 August, 8.50 am in Singapore and 8.50 pm in New York. There is no major economic data for the day and thus, expect the market to remain choppy unless we see major incoming news.