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10/2/23
#Stocks – $XLU
#Macro – $SPX, $NDX, #Rates
- RTM Rates Push Higher On Strong Economic Data
- RTM: LIVE Q&A Session At 1:15 PM ET -Replay
- RTM Options Update: The SPY Nears Critical Support As A Trader Bets On A Further Decline
- RTM: And The Market Paused, For Now.
- RTM: Stocks Getting Closer
- RTM- At A Breaking Point
Stocks finished the day lower as rates pushed higher again and spreads widened. The 10-year climbed to 4.69%, and the help to spread between the ten and the two widened to -42 bps, which is important. Again, the 10-year is very close to breaking out to a new level because, after 4.68%, I don’t see much standing in the way of a run to 5%. There seem to be several combinations that could take the 10-year higher, and the bull flag also appears to be another one. However, it seems to be getting stretched, and this type of thing where it could snap the other way, too. So it is almost as if you have to take it day by day.
Meanwhile, the dollar index also rose today to 107. 
Most of the move today was driven by the hotter-than-expected ISM data this morning. Tomorrow, we get the JOLTS data; if you remember, last month, the JOLTS data came in cooler than expected, and we got that big gamma squeeze higher, which took about a week or so to work off. So, something to be aware of tomorrow if the JOLTS comes in cool again and the market pops because I would think rates and the dollar would move down.
The JOLTS data tends to be very unpredictable and also tends to be subject to big revisions. Still, despite the big surge in rates, the S&P 500 was flat and found some support in the 4,270 area today.
This level for the S&P 500 is very important because after this, again, there is much to support the market until 4,210.
The equal-weight RSP S&P 500 traded down by roughly 1.1%. Today’s divergence with the market cap S&P was primarily due to the mega-cap names, which managed to post gains after Goldman noted it forecasted an earning-led rally. The equal-weight S&P 500 is now down on the year, falling by more than 10% since peaking on July 27.
The utility sector XLU was down almost 5% today, and the ETF is now well below its October lows and is back to its June 2020 levels. These are not the type of moves you expect to see in the utility sector, which is supposed to be low beta, but then again, it isn’t typical for one to see rates surge on the long end of the curve like this.
This will be a busy week with a lot of data, and I think there will be quite a bit of volatility to come across all asset classes.
-Mike
Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.