The US MARKET TODAY – Midday Overview for Sept 27
The stock market indexes climbed higher overnight but gave up gains in the first half of Tuesday’s session. Reuters reported that production at the Shanghai Tesla (TSLA) plant will drop 7% below capacity through the end of 2022, raising demand speculation.
The S&P 500 is trading lower by 0.3% at the noon hour while the Nasdaq composite is holding a 0.5% gain. The Russell 2000 small-cap index has dumped back to even while the Dow Jones Industrial Average is lagging other benchmarks, down by 0.4%.
Volume on the NYSE and the Nasdaq is lower, compared to the same time on Monday. This isn’t a bullish sign for the short-term rally attempt.
A countertrend hit the currency markets, lifting the British Pound after Monday’s rout. The oversold impulse is supporting speculative assets, with gold up 0.6% and Bitcoin 4.5%. The U.S. Dollar Index is headed in the other direction, down 0.2%.
Treasuries gave up early bounces and are losing ground once again. The 10-year note is trading at 3.97%, just a stone’s throw under the psychological 4.00% level.
WTI crude oil surged to $77.00 per barrel, with positive action underpinned by rig shutdowns ahead of Hurricane Ian.
Home prices decelerated in Case-Shiller and FHFA premarket reports but both studies focused on July conditions, offering few insights about the fourth quarter.
Robust August new home sales and September consumer confidence showed no signs of waning demand. Analysts and the Twittersphere responded to the strength with near-universal consensus the positive data won’t last.
Will the Fed Trigger Deep Recession?
More than 20 Fed speeches are on this week’s schedule but, so far at least, the underlying message remains the same.
Governors Charles Evans, James Bullard and Loretta Mester carried Chairman Jerome Powell’s torch in Tuesday’s premarket, pressing the need for sustained rate hikes to fight inflation. However, Evans added that he’s a “little bit nervous” about raising rates “too quickly,” marking the second time this week that caution has entered the Fed’s messaging lingo.
Chairman Powell’s insistence on “restoring price stability” is shifting the U.S. economy toward a recession that could be deeper and more painful than forecast.
Inflation may have peaked earlier this year while the trio of rate hikes hasn’t had time to percolate through the U.S. economic system. As a result, demand destruction could slam the brakes so hard that American consumers without seat belts are in major peril.
Tesla Shanghai Red Flag:
Reuters is reporting that Tesla will hold production levels at the Shanghai gigafactory to 93% of capacity into the start of 2023. The decision is raising doubts about China demand, undermined by economic pressures and greater local competition.
China is a hugely-important segment for CEO Elon Musk and Co., comprising nearly 25% of Tesla’s worldwide revenue. Tesla shares are up 2.2% at 10:30 this morning.
Energy and resource stocks are also largely up today:
Chinese Stocks at Midday.