What now?
Consumers are still spending despite higher rates. Earnings have been decent. And stocks are still up in October even as the Israel-Hamas war is boosting oil prices and increasing global uncertainty.
Retail sales for September were surprisingly strong, rising a higher-than-expected 0.7% from August. Earnings from Bank of America topped forecasts. helping to propel bank stocks to another rally. The overall market was in green in midday trading, despite opening lower.
It looks like Wall Street is willing to shrug off worries about the Israel-Hamas war and the resulting spike in crude prices. Will this continue? Perhaps.
The market does tend to focus more on economics and earnings over other non-financial headlines. To that end, the VIX, aka the fear gauge of Wall Street, tumbled Tuesday too. The VIX is now trading at a relatively low level just north of 15. (The CNN Business Fear & Greed Index, which looks at the VIX and six other indicators of sentiment, still shows Faer levels though.)
So what now? It appears that the market and economy might still be in the proverbial Goldilocks zone. Not too hot and not too cold. That should keep the Federal Reserve on the sidelines. Fed funds futures are pricing in about a 12% chance of a rate hike at the FOMC’s next meeting on November 1. That’s down from odds of about 27% for a rate increase just a month ago.
But the Fed is going to remain…say it with me one more time with feeling everyone…data dependent. Stocks are going to fluctuate depending on how the economy is doing and whether or not corporate profits continue to live up to expectations.