To The Moon

Friday, the financial markets experienced a challenging day. The $DJIA(.DJI)$ recorded its fourth consecutive day of declines, dropping 0.3% in a single session and accumulating a 1.9% loss for the week. The $S&P 500(.SPX)$ also declined by 0.2% on that day, bringing its weekly loss to 2.9%. The $NASDAQ(.IXIC)$ showed the most modest performance, with only a 0.1% decline on the day, but it suffered a significant 3.6% drop for the week. This session was marked by the impact of the recent Federal Reserve meeting, the United Auto Workers' strike, and concerns related to a potential government shutdown.

SPX

Gain

$Splunk(SPLK)$ (+20%):Cisco will buy the cybersecurity specialist at USD 157 per share to strengthen its offering.

Loss

$ARM Holdings Ltd(ARM)$ (-14%): After a very successful debut on the stock market, the SoftBank portfolio company took a breather, falling back to around USD 53.

Key Events of the Week:

The week was packed with economic releases. Firstly, the Federal Reserve kept interest rates unchanged but delivered a slightly more "hawkish" message, reflecting increased confidence in economic growth and lower-than-expected unemployment rates. The Fed's economic projections were also revised upward, with a GDP growth forecast for 2023 of 2.1%.

Investors also closely monitored the repercussions of the United Auto Workers' strike on the U.S. auto industry and concerns about a potential government shutdown as government funding was set to expire on October 1.

The Fed priced out two cuts for 2024 (chart below). Powell said that he 'wouldn't call soft landing a baseline expectation'.

Fed cut

Market Scenario:

The current market is characterized by uncertainty and significant fluctuations. The Federal Reserve's decision to maintain higher interest rates for an extended period due to robust economic growth has impacted the markets. Higher interest rates have led to an increase in bond yields, which in turn has decreased the value of equity assets. Investors have had to adjust their models to account for this new reality, understanding that higher rates can reduce the future value of corporate earnings.

Moreover, the market appears to have shifted from initial concerns that the Fed's monetary policy tightening would trigger a recession to worries that stronger-than-expected economic growth might compel the Fed to maintain its restrictive stance for some time. As a result, good economic news is now interpreted as bad news for stocks.

In the coming weeks, investors will closely monitor economic indicators, Fed liquidity movements, and political developments, especially regarding government funding. Markets are likely to remain volatile as investors adapt to this new economic and monetary environment…

The upcoming week will mark a transitional period following a series of major central bank decisions. Companies are now gearing up to release their third-quarter results, which will kick off in three weeks

SPX Levels

• Key levels : 4300-4400

• Upper area : 4350-4465-4480

• Lower area : 4315-4300

SPX levels

Agenda

In Europe, focus will be on the German Ifo index (Monday) and the preliminary estimate of German inflation (Thursday). In the United States, the Conference Board's US consumer confidence index (Tuesday) will precede durable goods orders and a speech by Jerome Powell on Wednesday. On Friday, attention will be on the European preliminary inflation for September and the US PCE inflation.

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@TigerStars @TigerPM @CaptainTiger