1. Big tech rebounds as bulls buy the dip
Technology shares in the US rallied until closing after a selloff sent some of the big tickers into correction land which triggered a wave of bargain hunting. Large cap tech stocks fueled a gain in the overall market which sent the Nasdaq northbound for its best gain in over a month. The recent pullback has sent the Nasdaq in oversold territory and the fear of rising yields hurting growth stocks was largely put aside as investors weighed in on strong fundamentals.
2. US 30 year yield rises to highest since June
The 30 year yields have climbed to their highest level since June on the back of rising energy prices striking concern that inflation will accelerate. The 30 year yield benchmark jumped to 2.21% and the break-even rate (expectation of consumer prices) rose to 2.49%. The energy crisis seems to become priced into the rates curve. This latest move is also driven by an unexpected increase in September ISM Services. Investors are increasingly expecting a QE tapering deal for the November fed meeting.
3. The IMF is trimming down global growth forecasts
The IMF managing director cited rising risks from inflation, debt and a divergence in growth prospects between countries with access to vaccines and those without. The directors said specific outlooks would be shared next week after giving a speech in Milan. The IMF fears that rising interest rates could depress growth even further and put pressure on essentials like food and energy prices. The IMF and World Bank meet next week.
4. The VIX signals a sleepy fear gauge
The Cboe Vol index the VIX, closed 21.30 just above its 19.50 lifetime average. Its term structure shows expectations of increased volatility further out in the future than close in which translate to a ''calm''. So, stocks might be over-reacting to some of the negative drivers out there like the debt ceiling deadline. If the debt ceiling was at risk of a breach then the one month VIX future would exceed the four-month contract, but this is not what we are seeing. So, a rally post debt ceiling deal could be in store.
5. US trade deficit grows to a record in August
The US trade deficit grew to a record in August as American consumers continue to demand foreign imported goods. The trade gap in goods and services expanded to $73 billion in August from $70 billion in July. While shipments overall have seen an increase in the US, the semiconductor shortage has seen automakers reducing production by 8%. Analyses show that China is behind on importing manufacturing and other goods from the US while they continue to see exports to the US grow.