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“A wrong decision is better than indecision.” – Tony Soprano
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Futures were positive overnight, but equities in Europe have been weakening throughout that session, and with both interest rates and oil continuing to drift higher, that has dampened the mood in US markets as we approach the opening bell. As is usually the case when interest rates are higher, the Nasdaq is leading the pre-market declines, but even here, the magnitude of the weakness has been modest.
The economic calendar is quiet to kick off the week with NAHB Homebuilder sentiment the only report scheduled today. That will be followed with Housing Starts and Building Permits on Tuesday, and then Wednesday will be the day everyone is waiting for as the Fed is expected to leave rates unchanged. Last week it was CPI we were all waiting for, and now this week it’s the Fed. There’s always something!
The market has been stuck in a period of indecision for well over a month now as the S&P 500 has traded within 2% of its 50-day moving average (DMA) since early August. Heading into the last two weeks of September, which has historically been one of the weakest two-week periods of the year, the S&P 500 is down around 1.3% for the month. At the sector level, It has been an interesting dynamic as the biggest losers for the month haven’t necessarily been the sectors that were already up the most.
Technology, which is one of the leading sectors YTD, is down more than any other sector on a MTD basis, but Communication Services (the best performing sector YTD) is barely down, and Consumer Discretionary, the third best performing sector YTD, is higher. Both Communication Services and Consumer Discretionary are also outperforming Health Care, Consumer Staples, and Real Estate which are three of the four worst performing sectors this year. So, it hasn’t just been a period of mean reversion.
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