Market 09/22: Index ends 2 days of sell-off as bonds cool off

Key highlights:

Technical Bounce across the entire tech sector
Bond yields cool off across the board from peaks, Bill Ackman short 30Y bonds to 5.5%
US and Europe PMI releases: Signs of economic slowdown, global inflation rising
Strike continues, 50% of domestic auto production may be affected
Oil prices surge after Russia's decision to ban diesel and gasoline exports

Technical Bounce across the entire tech sector

After 2 days of sell-off since the 4th FOMC meeting just past, pressure on the entire tech sector was clearly relieved today as most of the short-term puts entered after FOMC reached expiration, allowing market makers to unhedge and temporarily push large gamma-sensitive stocks like NVDA pinned back to important gamma levels.

Heatmap shows the market is carried by money flow from the tech sector as bond yields retreat from morning peaks.

However, notably, today's rally is more of a technical bounce and shorts-cover on expiration day than a change in investor sentiment. Internals lack buyers with buy volume to sell ratio only 1.66:1 across the entire NYSE. Money flow is uneven throughout the morning with the energy sector continuing to attract investors for the 2nd straight week while small caps and retail continue to face pressure under pessimistic views on economic direction as well as UAW strike developments.

Bond yields cool off across the board from peaks, Bill Ackman short 30Y bonds to 5.5%

This occurs after credit pressure on businesses returns to November peak and trends toward 2009 post-financial crisis peak.

Not long ago, Viet Hustler reported hedge funds shorting bonds at the largest level in history, and it seems they were right with Bill Ackman declaring shorts until the 30Y hits 5.5%

US and Europe PMI releases: Signs of economic slowdown, global inflation rising

EU composite PMI records modest increase to 47.1 (+0.3), mainly in Services sector. France's PMI slows to 34-month low.

Following EU, US Services PMI also disappoints by dropping to 50.2 (below previous quarter's 50.5), lowest since January. Manufacturing PMI edges up slightly to 48.9.

September PMI data heightens concerns of stagnant growth. GDP records growth but remains modest over the last 2 months, showing no clear improvement. Services sector continues to lose momentum as order volumes decline.

Additionally, inflationary pressure persists as input costs rise again.

Strike continues, 50% of domestic auto production may be affected

Auto workers' strike negotiations have failed. Below are the negotiation proposals from both sides, with the union's demands deemed 'unreasonably excessive' including 40% wage increase and many other benefits.

UAW has about $820 million strike fund and claims it can sustain the strike for up to 3 months.

Today UAW called for strike to expand to parts manufacturing plants for Ford, GM and Stellantis, not limited to assembly plant workers. As a result, the US may temporarily lose 50% of total domestic auto production.

Oil prices surge after Russia's decision to ban diesel and gasoline exports

Russia says it issued a temporary ban to lower domestic fuel prices, pressuring the already tight global market.

Worldwide refineries are struggling to produce enough fuel as crude supply from both Russia and Saudi Arabia is reduced. In northwest Europe, diesel crack to crude surges to 37 USD/barrel, highest in the year.

October delivery futures also rise against next month's fuel, reaching nearly 36 USD/ton.

Some other news:

Bank of Japan BoJ keeps monetary policy unchanged, maintaining short-term rate at -0.1% and yield limit on 10-year bonds at 0.

Chevron and Australian union reach agreement to end strike at major LNG production facilities in Australia. The strike caused LNG prices to rise 35% in August.
Amazon confirms it will run ads in Prime Video content, users must pay extra 2.99 USD/month (~20% increase over regular fee) to remove these ads.
Apple slows pace of wage increases for retail employees, sign that labor market is loosening.
JPMorgan adds India to emerging markets bond index, expected to boost foreign capital inflows into India's debt market.