Week of Oct 13 2024

The Federal Reserve's next moves are under intense scrutiny. While the market had been pricing in rate cuts, recent comments from Fed officials, particularly Raphael Bostic, have hinted at a potential pause in November. This shift in tone has caused some recalibration in market expectations, with traders now considering the possibility of a "higher for longer" interest rate environment. The upcoming FOMC meeting will be crucial in providing clarity on the Fed's stance and future policy path.

On the global stage, China's fiscal stimulus package announcement has been met with mixed reactions. The lack of specifics regarding the size of the package has left markets uncertain, potentially impacting global growth expectations. Meanwhile, geopolitical tensions, particularly in the Middle East, have added a layer of complexity to the market outlook, with potential implications for oil prices and global trade.

Technically, the S&P 500's recent break above 5,800 is seen as significant, with this level now potentially acting as support. The 10-year Treasury yield, hovering around 4%, also remains a key level to watch, with moves above or below potentially signaling shifts in economic expectations and risk appetite. Additionally, the unprecedented levels of the spec positioning for small traders in major index futures is raising eyebrows, though not necessarily signaling an immediate sell-off.

Looking ahead, several catalysts could shape market direction. The ongoing Q3 earnings season will provide insights into corporate health and future guidance. The ECB policy meeting, with an expected 25bps rate cut, could influence global monetary policy perceptions. Key economic data releases, including US retail sales, housing data, and Chinese GDP figures, will be closely watched for signs of economic momentum or slowdown.