To The Moon

Ratings firm Moody’s lowered its assessment of U.S. credit outlook from “stable” to “negative” Friday, underscoring America’s worsening fiscal standing and the implications of political dysfunction.

Investors, however, paid little attention to a Moody's announcement late on Friday. ⚠️ Trading tips: Looking at SPY calls above 440.2 and puts below 438.6 on Monday.

Dip buy zone

U.S. equity futures pointed 0.44 per cent lower, following Friday's 1.56 per cent rally for the S&P 500.

Nomura Securities strategist Naka Matsuzawa said equities are likely close to a peak. "Up until now the market has been taking bad economic news as good news, because that would mean a pause in Fed rate hikes," he said.

"But now, the Treasury market has already priced in a pause, so there's not much room for Treasury yields to fall further," removing a support for the stock market, he added. "In short, I don't think the stock market rally is going to continue."

Economic news this week

The week is packed with big risk events, from consumer inflation and retail sales figures from the United States on Tuesday and Wednesday respectively, with Chinese retail sales also due Wednesday, following lacklustre sales growth at the annual Singles Day shopping festival over the weekend.

The marquee geopolitical event is also mid-week, with a meeting between U.S. President Joe Biden and Chinese leader Xi Jinping on the sidelines of an Asia-Pacific Economic Cooperation (APEC) summit in San Francisco.

Investors will be keeping an eye on October’s monthly federal budget, as well as the Federal Reserve Bank of New York’s October consumer expectations survey. Fed Governor Lisa Cook is also scheduled to give remarks Monday morning. This all comes ahead of the monthly consumer price index data on Tuesday.

Some interesting data on SPY performance

The consumer price index report for October will be a key event as investors look for direction with interest rates, especially after Federal Reserve Chairman Jerome Powell said at an International Monetary Fund conference that the Fed would not hesitate to tighten monetary policy if the data supported a hike.

While markets are pricing in less than a 20% probability of a December rate increase, a stronger-than-expected CPI report or hot retail sales print could reset expectations.

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