Powell Cautions As Time Is Running Out To Keep Government Open

It's been a relatively quiet week for stocks after large moves the week prior. Both the S&P 500 and Nasdaq Composite enter Friday having moved less than 0.5% since last Friday. In fact, Thursday was one of the bigger moves we've seen this week with the S&P falling 0.8% and Nasdaq dropping 0.9%

Little in the way or earnings and economic data have left investors largely sitting on their hands, waiting on data to decipher. When there's a lack of data, markets begin attempting to quantify qualitative statements, such as those made yesterday by Federal Reserve Chairman Powell. Powell cautioned that the latest pause in raising interest rates shouldn't be taken as cause for a victory lap and that the Fed would not hesitate to raise rates again if data suggests inflation is heating up. 

At the same time Powell was delivering his remarks, the Treasury was struggling to sell $24 billion in long term debt. These auctions are not something I typically discuss; however, yesterday's auction was much weaker than expected. That led to bond prices falling and yields jumping. The 10-year note hit a high on Thursday of 4.65% before closing just below that at 4.64%. That was a significant uptick from Wednesday's low of 4.48%. 

Although rates moved higher yesterday and Powell made some cautionary statements, we've really seen markets ease off inflation hedge trades, like gold. In just the last couple weeks, the price of gold is down 3.5%. When inflation is a concern, we tend to see a shift to commodities such as precious metals, therefore, the drop in prices may be a signal markets believe the worst of inflation is in the rear-view mirror.

Some individual stocks making news this morning include Facebook parent Meta. They reached a deal with Tencent to sell Meta's headset in China. Meta hasn't had access to Chinese markets in fourteen years, so this represents a huge market to potentially tap into. 

Shares of Trade Desk are lower by 24% in premarket after the company reported third quarter earnings that topped estimates, but said fourth quarter revenues would fall well below estimates. Plug Power is also lower premarket by 38% after they missed on both earnings and revenues. Supply chain issued are plaguing the one-time market darling whose shares have fallen from a high of $46.50 just two years ago. Lastly, shares of Diageo are lower by 14% after the drinking company warned of lower sales in both Latin America and the Carribean. Diageo owns Johnnie Walker, Tanqueray gin and Guinness.

A couple other things I'm keeping an eye on as we head into the weekend are whether the S&P 500 can break and hold 4400. That is a significant technical level and one I've spoken about in the past. I'm also monitoring what happens in Washington as the government has until next Friday to come up with a solution in order to avoid a government shutdown. This is a story that received a lot more attention a couple months back, in part because the House of Representatives was about to remove Kevin McCarthy as Speaker. With Mike Johnson now in that role, it's largely expected another continuing resolution will be adopted; however, it's still a story worth watching. As always, I would stick with your investing strategy and long-term plans.

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