Fasten your seatbelts, it’s gonna be a bumpy ride

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What we have here is a stock market that finally looks vulnerable as Treasury yields rise, oil prices could easily hit $ 90 a barrel, and supply chain issues show no sign of abating. ‘relaxation. Margo Channing said it best when she played Bette Davis in the movie All About Eve, “Fasten Your Seat Belts; it’s gonna be a rough night.

There is a lot of drama on Wall Street and most of it has to do with a reset in inflation expectations. This surge in Treasury yields is kryptonite for the Nasdaq and will ultimately lower growth forecasts. The Fed was prepared to tolerate a slight overshoot in inflation, but the current energy crisis could force a major pivot before the end of the year.

U.S. stocks are strictly following the bond market sell-off, which coincidentally comes with slowing economic data and standard commentary from Treasury Secretary Yellen and Fed Chairman Powell. No one expects the United States to default, but Wall Street will undoubtedly show some nervousness. JPMorgan CEO Dimon is preparing his bank for a possible credit default in the United States as debt limit talks come to an end.

Yellen / Powell

Secretary of the Treasury Yellen’s testimony to lawmakers included a warning that the Treasury would likely exhaust its extraordinary measures if Congress had not acted to increase or suspend the debt limit by October 18.e. Yellen reiterated his call for bipartisan accountability in managing the debt ceiling.

Fed Chairman Powell reiterated that the United States is far from meeting its maximum employment criteria. Powell’s comments on the debt limit mirror those of Yellen, noting that increasing the debt limit is essential to avoid defaults. Powell stuck to the transitional scenario and reiterated his expectations that higher inflation will come down.

US data is a mixed bag

The wrath of US economic data has shown that the impact of the delta variant continues to weigh on the economy, and supply chain issues will likely be visible in next month’s data. The anticipated US trade balance data has been larger than expected and still near record levels. Given all the difficulties with the ports, expectations were high that imports would be low, but a solid reading suggests that may not happen until next month’s report. The housing market remains the bright spot in the economy after house prices jumped 19.7%, the biggest increase in 30 years. The Conference Board’s consumer confidence index clearly showed the impact of the delta variant, as a surprise drop in the stock (7-month low) was accompanied by a significant drop in both the current situation and surveys of expectations. The Richmond Fed manufacturing index delivered its first negative reading since last summer.

Today’s economic data has helped fuel the inflation debate as price pressures will continue as the housing market remains warm, delays in detecting shipping problems in ports and the Truck driver research has yet to impact August’s economic data, and as the American consumer begins to look a little vulnerable.

Gas

European officials pray for a warm winter. Soaring natural gas prices could threaten an economic recovery that is already on ice. Natural gas fundamentals all point to higher prices: robust Chinese demand, stranded US offshore production and low supplies from Russia. The natural gas market has a supply problem and it doesn’t look like that will change anytime soon. EU leaders are scrambling to do something, but it is unclear what they will consider at the energy summit on October 21.

U.S. natural gas prices climbed above the $ 6 level, but erased their earlier gains. There is growing speculation that natural gas prices could reach the highest levels since the early 2000s around the $ 10 region.

Bitcoin

The surge in global bond yields triggered a stronger dollar and a major unwinding of risky assets that included all major cryptocurrencies. Investors are obsessed with Fed Chairman Powell’s testimony to Congress. Powell believes existing law allows for the creation of a digital currency, but added that congressional authorization would be ideal.

Given the pain in stocks and commodity currencies, bitcoin’s weakness is somewhat relatively contained. As long as $ 38,000 is earmarked for bitcoin, bitcoin supporters can continue to buy this drop.

This article is for general information purposes only. It is not an investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not for everyone. You could lose all of your deposited funds.

With over 20 years of trading experience, Ed Moya is a senior market analyst at OANDA, producing late-breaking cross-market analysis, covering geopolitical events, central bank policies and market reaction to company news. . His particular expertise spans a wide range of asset classes including currencies, commodities, fixed income, stocks and cryptocurrencies. During his career, Ed has worked with some of the leading currency brokers, research teams and information services on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently, he worked with TradeTheNews.com, where he provided market analysis on economic data and business news. Based in New York City, Ed is a regular guest on several major financial TV stations including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His opinions are endorsed by the world’s most renowned global news agencies including Reuters, Bloomberg and Associated Press, and he is regularly cited in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.

Ed Moya
Ed Moya


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