Market Brief – Monday 10/29/18

On what is being billed as a critical week for U.S. stocks, equities lurched in early trading after European equities were up and Asian equities were mostly down. The Fed’s preferred inflation gauge, or Core PCE, showed inflation held at +2.0% for September. Treasury yields faded their early move higher as inflation expectations moderate.

Personal incomes rose +0.2% MoM, under expectations for a +0.4% MoM increase. Personal spending was up +0.4% MoM, below expectations of a +0.5% MoM print as consumers continue to spend beyond their incomes. On a year-over-year basis, both personal income and spending are decelerating. Even the personal savings rate slid to its lowest level since December 2017, validating consumers are dipping into their savings to fuel personal spending.

After starting out they day higher, equities sold off throughout the day and found buyers going into the last 15 minutes of trading. All major equity indices are below their 200-day moving averages as well as their 50-week moving averages. The popular FANG stocks that led the market higher are all down -20% or more from their peak.

Treasury yields were up slightly on the day but faded most of their move higher. When the market turns, Treasury yields tend to rapidly fall. With a near-record short interest underneath, it will be interesting to see all these short-sellers forced to become buyers when they are squeezed out.

Gold miners tagged their 50-day moving average, a positive sign, but faded their gains as the broad equity market sold off. Support for the miners is likely below their 50-DMA, so we will continue to look for support and an opportunity to buy.

Agricultural commodities are in a tight range between buyers are sellers. Once the buyers overcome, prices should move higher.

Today’s move down in equity prices is not a good signal for the bulls.