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Market News Posted by John Doherty August 20, 2023

Stocks, Interest Rates, and a Fresh Thought of the Week

Trading Screen

Top things to watch this week

The Economic Calendar:

MONDAY: 3-Month Bill Auction, 6-Month Bill Auction

TUESDAY: Thomas Barkin Speaks, Existing Home Sales, Richmond Fed Manufacturing Index, Money Supply, Austan Goolsbee Speaks

WEDNESDAY: MBA Mortgage Applications, PMI Composite Flash, New Home Sales, EIA Petroleum Status Report, 4-Month Bill Auction, 2-Yr FRN Note Auction, 20-Yr Bond Auction

THURSDAY: Durable Goods Orders, Jobless Claims, Chicago Fed National Activity Index, EIA Natural Gas Report, Kansas City Fed Manufacturing Index, 4-Week Bill Auction, 8-Week Bill Auction, 30-Yr TIPS Auction, Fed Balance Sheet

FRIDAY: Consumer Sentiment, Jerome Powell Speaks, Baker Hughes Rig Count

Key Events:

  • What happens after three straight weeks of declines for the S&P 500 and the Nasdaq-100?
  • The Federal Reserve’s Jackson Hole symposium and Fed Chair Powell’s speech.
  • Traders are concerned with higher Treasury yields, renewed inflation, and a China slump.
  • FOMC speakers active: Barkin, Bowman, Goolsbee, Powell.
  • Lite economic calendar with an eye on PMI and U.S. durable goods orders.
  • Earnings reports of interest are Nvidia and Snowflake.
  • The United Auto Workers union set a vote next week on possible strikes against automakers.
  • Traders could also see the AMC Entertainment 1-for-10 reverse stock split and subsequent APE unit conversion finally close.


Did September come early this year? Some traders think there is frontrunning going on before the seasonal trend. It’s a confluence of several different negative factors at the same time.

The median return for the S&P since 1928 is -1.56%, and September is the worst-performing month of the year.

SPX Seasonality - September 2023

Source: Goldman Sachs

Interest Rate Futures

U.S. Treasury yields suggest that a significant portion of the repricing that has occurred is the result of an improved growth outlook and expectations of a continued tighter policy. These two factors explain most of the change in 10yr yields since mid-July.

10-yr yields have moved from 3.85% to 4.25% over the last month.

Regarding Fed thinking, minutes from its most recent policy meeting and comments from Minneapolis Fed chief Neel Kashkari insisted it was still too early to say the central bank’s rate rise campaign was over. “I’m not ready to say that we’re done.”

A higher-for-longer narrative is coming from the Fed, causing rates to keep increasing. The 10-yr Treasury yields directly impact mortgage rates, so if they go higher, we’re likely to see continued stress in housing markets. It is contributing to the recent stock market selloff.

30-Year yield 4.38%
10-Year yield 4.25%
5-Year yield 4.38%
2-Year yield 4.94%
2-10 Yield spread -0.69%


The schedule of events at the Jackson Hole Symposium will be published on the eve of the event, but the highlight will be Fed Chair Powell giving remarks at the event on Friday.

The Federal Reserve’s Jackson Hole Economic Symposium is a three-day annual international conference by the Federal Reserve Bank of Kansas City at Jackson Hole in the United States, attended by central bank leaders worldwide.

Chair Powell’s speech at Jackson Hole this year probably will not carry the same ‘pain’ warning as last year, but it seems the message will still be “seeing the job through.”

We don’t see Powell giving much direction about where policy is headed at this week’s Jackson Hole meeting. Perhaps the one thing he could say that would have the support of the Committee is that policy will remain restrictive for as long as it takes to squeeze out inflation pressures.


The FOMC meeting minutes last Wednesday highlighted that inflation remains “unacceptably high,” and officials continued to see significant upside risks to inflation. The market responded, keeping a hawkish stance.

“With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy… Participants generally noted a high degree of uncertainty regarding the cumulative effects on the economy of past monetary policy tightening… and emphasized the importance of communicating as clearly as possible about the Committee’s data-dependent approach to policy and its firm commitment to bring inflation down to its 2% objective.”


Markets are trading jittery at the moment. The strategy has changed for many traders from buy-the-dip to sell-the-rip. Even good corporate news has recently responded negatively.

The most significant technical factor changes were the bearish turn in options flows (short gamma levels) and CTA/momentum selling at key price levels. Some analysts say around $ 200 billion in global stock index CTA sell orders if we are down one sigma from here.

The fundamental factors influencing the rise are bond yields and challenging growth news from China.

Seasonally, September stock market returns are the weakest.

SP 500 Forward Prices - Aug 2023

Source: BofA Research


Bitcoin’s sharp decline of -11.1% last week likely started with macro weakness in the stock market and tech stocks and accelerated on liquidations of leveraged futures long positions on exchanges.

Before the last few trading days, bitcoin had remained in a narrow range between $29-30.5k, despite widespread weakness in global asset markets.

The below news also appeared to contribute to bearish sentiment in the market…

On Thursday, the Wall Street Journal reported that SpaceX (Elon Musk CEO) “wrote down the value of bitcoin it owns by a total of $373 million last year and in 2021 and has sold the cryptocurrency”.

The news appeared to contribute to bearish sentiment in the market.


The currency markets have been trading two major themes lately: U.S. resilience and China’s economic challenges.

While these have mixed implications for other asset sectors, in FX, they both tend to mean one thing—a stronger USD.

Our trader’s logic is a break in the USD likely has to come from a change in China and Europe. The most plausible path to a more substantial Dollar downside involves better growth in Europe and Asia and continued disinflation in the U.S.


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