[Chart courtesy of MarketWatch.com]
- Moving the markets
It was a matter of treading water for most of the day, with the major indexes limping around their respective unchanged lines, until a last-minute pump pushed the indices up and into a green close.
Mid-day attempts to get a rally going fell short, as weakness in the energy sector, due to reports that Saudi Arabia may recover sooner than expected, pulled oil off its lofty level. According to Reuters, Saudi Arabia will restore 70% of the 5.7 million barrels a day production lost rather quickly and the balance within the next two to three weeks.
If so, yesterday’s crude oil spike will turn out to be an outlier with no consequences to equity markets. Traders seemed to share that view and quickly focused their attention on the Fed and expectations that they would reduce interest rates when they meet tomorrow.
It is a foregone conclusion that a -0.25% ease is priced in the market, although the whisper number of -0.5% is still making the rounds. One thing is for sure, if the Fed does not deliver a rate cut, equities will sell off sharply. Remember, these markets are like a drug addict that does not function very well without a regular dose of stimulus.
ZH summed it up this way:
Tomorrow’s rate cut will come with full employment, surging inflation, record high stock prices, and near record low interest rates.
Makes me want to go “Hmmm.”(more…)