U.S. stocks closed lower on a quiet trading day during the Jewish New Year holiday, with little major news to drive the market. Small-cap stocks were favored at the open while large-cap tech stocks were sold off, but the Russell 2000 index peaked near the European close, after which the NDX/RTY pair quickly reversed course…
At the close, the Nasdaq and S&P 500 were the biggest losers, while small-cap stocks and the Dow Jones Industrial Average erased all of their intraday gains. The bright spot for CNBC was that the market didn't close at its lowest point…
Some believe the stock market decline stemmed from Federal Reserve Chairman Jerome Powell's comments on stock valuations:
“We do pay attention to overall financial conditions and ask ourselves whether our policies are affecting financial conditions in the way we expect,” Powell said. “But you’re right, in terms of many metrics, for example, stock prices are indeed at fairly high valuation levels.”
Yes... "quite" high...
Trader Dynamics
Goldman Sachs trading floor activity was 3/10, with trading volume still slightly above average and 7% above the 20-day moving average.
Long-term institutional investors (LOs): Selling pressure is slightly stronger, with more buying in consumer staples, consumer discretionary, and raw material supplies than in utilities and industrials.
Hedge funds (HFs): Selling was slightly stronger, with supply in technology, consumer staples, and financials exceeding demand for communication services and macro products.
Macroeconomic data
Today's economic data continues to show that the overall economy is stable:
The S&P manufacturing and services PMIs were largely in line with expectations.
The Richmond Fed Manufacturing Index improved slightly from the previous month, but remained negative (-5).
Following the "three dovish and three hawkish" statements, Powell delivered his first speech after the FOMC meeting, essentially reiterating his previous views, slightly leaning dovish, and emphasizing that concerns about employment outweighed the risks of inflation (he described it as a "fireless, jobless economy"). However, there was almost no reaction to expectations of interest rate cuts…
Market performance
Short covering continued in the morning session, but selling accelerated after Powell's speech.
Major tech stocks: plunged, marking their worst single-day performance since August 1.
Volatility: After the tactical climax of "spot price increase + volatility increase" that we warned about yesterday, today's decline and increase in volatility are not unexpected.
US Treasury yields: declined slightly throughout the day, with longer-term yields leading the losses (2-year -1 basis point, 30-year -3 basis points). Since the surge in yields following the FOMC meeting last Thursday and Friday, the bond market has generally remained range-bound.
US dollar: Basically stagnant.
Gold and precious metals
Gold hit a new high overnight. Bloomberg reporter Nour Al Ali pointed out that the continuous record highs in gold prices denominated in Swiss francs this year prove that its rise is not solely dependent on a weaker dollar.
The Swiss franc is a typical safe-haven asset, having appreciated by over 12% against the US dollar this year. However, gold, priced in francs, has still risen by 25% (or 43% in US dollars). Platinum and silver have seen even larger gains, at 37% and 32% respectively.
This performance is similar to that during the European debt crisis and the COVID-19 pandemic, when investors relied on both gold and the Swiss franc as hedging tools. This suggests that the driving force is more from the structural needs of central banks than from speculative or geopolitical panic buying.
In other words, the fact that gold is priced in Swiss francs is itself a "stress test," measuring its safe-haven appeal relative to assets that already have a safety premium. If the US dollar weakens further or geopolitical risks resurface, $4,000/ounce for gold is just the next milestone.
crude
Oil prices surged, with rumors circulating on trading desks that the main reason was:
Russia may ban diesel exports and extend the ban on gasoline exports;
NATO pledged a “strong response” to Russian airspace incursions;
Trump criticized the EU at the United Nations for continuing to buy Russian oil and gas.
(Source: Bloomberg)
Cryptocurrency
Bitcoin: Continues to fall, testing the $111,000 level.
Ethereum: It broke below the 50-day moving average, and the downward trend continued.
Outlook
Although volatility has been moderate overall this year, Goldman Sachs' John Marshall expects it to rise in October, as it has in previous years.
Why does volatility tend to rise in October?
Companies release third-quarter financial reports and update full-year guidance;
Investors are chasing earnings before the end of the year;
This year’s environment is particularly conducive to a surge in the volatility of individual stocks – the stock price volatility on the second-quarter earnings day was the largest since the 2009 financial crisis.
Goldman Sachs recommends choosing short-term options for events, but avoiding buying volatility on days without events.
