Highlights
First there was an explosion
Safe haven trading
The Dead Fed and other news
Please note: All data, figures and graphs below are valid as of November 2nd. All trading carries risk. Only risk capital you are prepared to lose.
Overview
The US stock market opened the day in good spirits. Hopes were high that the losses of the past week would be reversed and that the SPX500 would soon find a new all time record high.
The ISM Manufacturing data was published a bit better than expected, yet the construction spending somehow managed to disappoint. Analysts were expecting to see an increase of 0.5%, yet spending declined 0.4% in November.
Then, there was an explosion. A major pipeline in Alabama caught fire and exploded, killing one person and giving a shock to the energy sector. What really fired people up though was an election poll from the United States showing that Donald Trump has a much better chance at winning than was previously thought.
The stocks didn't stand a chance and were flung to their lowest levels since July. The SPX500 is currently holding on for dear life to support at the 2100 level.
Safe Haven Trading?
It has all the bells and whistles of safe haven trading, surging gold, falling stocks, stronger Japanese yen, and rising Swiss franc. However, the USD, which typically rises when investors are fearful, took a hit yesterday along with the stocks...
So perhaps, it really is Trump fear that's driving the markets. Except for one thing...
1. Trump has spoken about several policies that should serve to strengthen the dollar. He's criticized the Fed for artificially keeping interest rates low for too long. So, should he be elected, rates would likely go up a lot faster. Plus, his vow to re-negotiate trade deals shouldn't be any reason for the buck to crash.
So is it fear we're seeing? Perhaps it's just uncertainty. The financial markets enjoy stability. So when they were sure that Clinton was going to be elected, for better or for worse, that was seen as a positive thing. Now that there's a question, and people don't know who the winner will be, the markets are headed into uncertainty, which of course creates volatility.
Coming Up Next
The FOMC announcement today is already dead in the water. Virtually all analysts expect a very neutral statement from the Fed so close to the presidential elections. The market is currently pricing in a 68% chance of a rate hike in December. They might try to boost that up a bit, but more likely Janet Yellen will try to instil some calm on the already jittery markets.
ADP NFP numbers are coming this afternoon. Be prepared! This will give us a clue and set expectations for the big NFP release on Friday.
Crude Oil inventories will also be reported today. The API report yesterday indicated an increase of 9.3 Million barrels. If the EIA report confirms this, we could see further selling towards the bottom of the $40 to $50 range.
Disclaimer: This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
Past performance is not an indication of future results. All trading carries risk. Only risk capital you're prepared to lose.