Investors Face a Tricky Dilemma Heading Into the Fed Announcement
Look for more choppy trading and positioning in front of Wednesday afternoon's decision.
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Market action was mixed on Monday, and reflected a move into names that should benefit from lower interest rates. Financials, utilities, and energy all performed well, but small-caps drove the strong breadth of around 6,000 gainers to 3,300 decliners. A very hefty number of 1,200 stocks also hit new 12-month highs.
The laggards were the Magnificent Seven and Apple AAPL in particular. The Magnificent Seven ETF (MAGS) was down 0.8%, with Apple giving back 2.8%. The Russell 2000 ETF IWM gained 0.4%.
While there was a good amount of green on the screens, it is choppy trading as investors make positioning moves in front of the Fed rate-cut announcement Wednesday afternoon. We are likely to see more of the same action on Tuesday and Wednesday morning.
The dilemma that market participants face at this point is that there has been a very sizable bounce in many stocks heading into the market-moving news on Wednesday. A rate cut is pretty much a sure thing, but has it already been discounted? Will the market be disappointed with a quarter-point rather than a half-point? Will negative seasonality raise its ugly head again? What will Jerome Powell indicate about future cuts?
There is a lot of news flow that can trigger a negative reaction, especially if the big runup continues into the news.
I’ve been doing some selling and don’t have many new buys on my radar right now. However, I’m pleased with some of the strong action in names I’m holding, including TG Therapeutics TGTX and Shift4 Payments FOUR.
Have a good evening. I’ll see you Tuesday.
At the time of publication, Rev Shark was long TGTX and FOUR.
