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I’ve been on the road, but I’m back and catching up on the market action from the past few days.
The Philly Fed and retail sales reports came out strong, but here’s where things get tricky: the positive numbers have some folks worried. Why?
You might be wondering, “Isn’t good news a good thing?”
Well, in normal times, yes — strong economic data usually signals growth, which is a win. But right now, we’re in a different kind of market. The Fed recently cut rates by a 1/2 point, and the market is expecting more cuts. But these latest reports make it less likely the Fed will move forward with another cut.
As you know if you’ve been following me for a while, my opinion is that they never should’ve cut by a half-point in the first place.
It was not warranted given the data — and ultimately it was an overreaction. But now that they've shown their hand, the market wants to hold them to it. That’s why investors are on edge — there’s uncertainty around whether or not the Fed will deliver the rate cut many were banking on.
What’s next? The big question now is whether the Fed will stick to its guns, or if they’ll back off on cuts at their November meeting, scheduled for the 6th and 7th. It’s a toss-up at this point.
Looking ahead to next week, earnings are going to dominate the conversation.
We’ve got a ton of major reports on deck, and they’re likely to drive most of the market's movement. The economic reports are light with only new home sales on Thursday and Michigan Consumer Sentiment on Friday.
NFLX Earnings? As for Netflix (NFLX), earnings are out tonight. I don’t have a strong prediction on that, but I’ll be watching the reaction closely.
Sometimes the play isn’t to predict the earnings itself but to see how the market reacts to it — that’s where the opportunity could be.
— Geof Smith
P.S. Nate Tucci is no fan of the Fed either and he says that the Fed’s rate cut has sent the market into a full blow melt-up! Here’s how he’s playing it.
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