It is getting really ugly. Oil has been decimated down over 23% since its June apex. In many regards it looks like oil futures are in a complete collapse as Brent crude is at the lowest level since December 2010.
Equities staged the biggest rally of the year following the release of the Minutes from the September FOMC meeting. The Minutes stated “growth might be slower than they expected if foreign economic growth came in weaker than anticipated.” The Fed also commented the rising value of the dollar could dampen inflationary expectations.
Equities declined sharply as the IMF cut its outlook for global growth and German industrial production fell, the biggest decline since 2009. Selling accelerated late in the afternoon after several moving average lines were violated. In my view, the proverbial machines co-opted trading once these levels were crossed.
In my view the employment report was relatively strong in many dimensions. Both private sector and non-farm payrolls were considerably higher than expected and so were the revisions from August. The jobless rate fell to 5.9%, the lowest rate since July 2008’s level of 6.1%. Average hourly earnings and hours worked also exceeded expectations both of which are precursors for future job gains.
Today is jobs Friday and the last jobs report before the mid-term election. What will it suggest? Will the data disappoint for the second consecutive month or will it surprise on the upside? In my view the markets have discounted either scenario.
Are the large capitalized issues finally rolling over like their small cap brethren? Yesterday was an ugly day as all indices came under considerable selling pressure. The catalysts for the selloff include a slowdown in Europe perhaps the result of the Russian Ukrainian invasion, potential greater sanctions against Russia because of this invasion, civil unrest in Hong Kong, and fears the US central bank may rise interest rates sooner than expected.
Equities fluctuated while the dollar extended a four year high and oil led a drop in commodities as the economic data suggested a possible delay in a change in monetary policy and Russia was considering capital controls to stem that country’s exodus of funds.
Is Dodd Frank yet another example of regulation that has created the next crisis? Dodd Frank changed the landscape in which the fixed income market operates, a market that is about 10 times greater in size and importance than the equity market.
Yesterday was an ugly day. Equities declined for a myriad of reasons; including a report from Reuters that Russia may seize foreign assets in retaliation of sanctions, domestic economic data that questions the timing of a change in monetary policy and European economic weakness that raises fears of a more pronounced slow down on the continent.