September 7, 2022

Markets:

Stock futures fell Wednesday as investors worry that the Federal Reserve will hand out another large rate hike in September in a bid to tame high inflation.

Stock futures dipped into negative territory after a Wall Street Journal article suggested that Federal Reserve Chairman Jerome Powell’s commitment to reduce inflation could mean that the central bank hikes rates by 0.75 percentage point in September, which would be the third consecutive increase of that size. Markets have been hoping that the Fed would start to hand out smaller increases starting in September, but are now pricing in an 86% chance of a 0.75 percentage point hike.

The moves came amid a surge in bond yields that saw the 10-year U.S. Treasury yield jump to its highest level since June. The rate on the 30-year Treasury closed at its highest level since 2014. Bond yields move inversely to prices. Rates dipped slightly Wednesday, with the 10-year trading at 3.321%. The 2-year and 30-year yields traded at 3.47% and 3.472%, respectively.

Investors are split on how to approach the market entering the first post-Labor Day week in September, a notoriously cruel month for stocks. All eyes are on the 3,900 level on the S&P 500. Some see the index falling to even lower lows, while others are optimistic about a year-end rally.

On Wednesday, the Federal Reserve will give its summary on current economic conditions, also known as the Beige Book. Elsewhere, Fed presidents Loretta Mester of Cleveland and Tom Barkin of Richmond, as well as Fed Vice Chair Lael Brainard are scheduled to speak at various events.

Portfolio:

We enter the new trading session holding positions in AFRM, COMM, SPWR, FIGS, and CNHI.  We patiently wait for the Fed release this afternoon and closely will be watching price activity. So many stocks reaching key trend lines for us; we are getting so close.  Let's remain patient and be on alert today, especially after the Fed release.  Let's have a great session.