Stock Market Calms Amidst Tech-Led Turmoil
Market Performance
The stock market displayed a more composed demeanor today following two days of tech-induced chaos. The S&P opened steadily, fluctuated slightly, and is projected to close with a slight dip. It followed the 0DTE delta flow closely, peaking around 10:30 am ET before slumping and failing to break out on a second attempt. Both the VIX and VVIX also attempted to break out but faded, with the VIX closing below 20 for the first time this week.
Market Anticipation
As noted by Goldman's trading desk, the market appears to be in a wait-and-see state ahead of tomorrow's crucial payrolls report. This follows a busy start to the week, with a focus on macro data after a better ISM services number this morning, and many questions about NFP tomorrow.
Market Sectors
In positive news, NVDA managed to close slightly green after two days of selling and four red closes in the previous five days. Additionally, the tech and communications sectors, which had recently been hit hard, rebounded alongside the consumer discretionary sector. TSLA and AMZN led gains in this sector, rising by 4.9% and 2.6% respectively.
Yields and Bonds
Despite underperformance by bond-proxies like utilities and staples, Treasury yields fell for the third consecutive day, dropping 2bps to 3.73%. Apart from a brief drop on August 5, yields have returned to 2024 lows. This is due to growing fears of a hard landing, which were exacerbated by the worst ADP private payrolls report since January 2021.
Oil and Recession Fears
Fears of an impending recession have driven oil prices to new 2024 lows, and they are on the verge of dropping below the 2023 lows. This is despite another significant crude inventory draw, the eighth in the last nine weeks. Rising global recession fears have overshadowed any positive news from the OPEC+ decision to delay increasing output by at least two months.
Gold and Debt
The looming recession, which is now almost guaranteed with the 2s10s yield curve disinverting for the first time in 26 months, will likely act as a catalyst for the next mega stimulus package. Gold is aware of this and is eagerly waiting as it retests its all-time highs. With total US debt expected to hit a record $36 trillion in three months, the upcoming debt monetization will make the Fed's post-WW2 Yield Curve Control seem like child's play.
Bottom Line
The stock market's recent performance and the looming recession suggest a turbulent time ahead. Despite some sectors showing signs of recovery, the overall economic picture remains uncertain. What are your thoughts on these developments? Do you think the market will recover, or are we heading for a hard landing? Share this article with your friends and discuss these critical issues. Don't forget to sign up for the Daily Briefing, delivered every day at 6pm.
