Stocks soared yesterday with all of the major indexes up nearly 2% or more.
Last week's interest rate hike, and the Fed raising their target rate to as high as 4.6% by early next year, has been weighing on the market ever since.
Stocks appeared oversold since late last week. But they still kept falling.
But yesterday, the market got the snapback it's been waiting for.
The next thing traders will be looking for is a follow-through day. That means another rally of 1% or more. By definition, the strongest follow-through days come between days 4 and 7. So that means sometime next week. That doesn't mean we can't go higher today or tomorrow. But we should definitely be looking for something substantial next week too. In the meantime, in order for the follow-through day to mean something, the market should not take out the previous lows.
In other news, MBA Mortgage Applications fell -3.7% with purchases down -0.4% and refi's down -10.9%.
The Pending Home Sales Index fell -2.0% m/m at 88.4.
Retail Inventories were up 1.4% m/m. Wholesale Inventories rose 1.3%.
And the State Street Investor Confidence Index gained 1.5 points to 108.8 from last month's 107.3. Asia was up 7.7 points at 100.1. North America was up 2.4 points at 109. Although, the European component fell -5.5 points.
Today we'll get the final estimate for Q2 GDP. The last estimate was -0.6% with Personal Consumption Expenditures up 1.5% annualized. The consensus is for the same.
We'll also get Weekly Jobless Claims, and Corporate Profits.
And everybody will be watching to see how Florida fares as hurricane Ian makes landfall.
Yesterday's sharp rally was welcomed news.
The big test now is if the market can build on these gains.
With plenty of economic positives in the economy right now, not the least of which is a strong labor market, strong earnings, strong consumer spending, and strong GDI growth, there's definitely the chance that the market is being too pessimistic.
Couple that with S&P valuations at multiyear lows (and trading below their 5-year average), and stocks begin to look cheap.
To read more about why stocks might be in for an end of year rally, be sure to read our latest commentary...
Is The Market Too Pessimistic?
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