Stocks fell again this afternoon as the ugly bear market selloff went from bad to worse. The Dow, S&P, and Nasdaq Composite all fell, capping off August on a low note. Now, investors will have to contend with September, one of the historically weakest months for bulls amid a full-fledged “hawk show” from the Fed.
That’s what soured the mood on Wall Street this morning after Cleveland Fed President Loretta Mester addressed the Dayton Area Chamber of Commerce on rate hike expectations.
“My current view is that it will be necessary to move the fed funds rate up to somewhat above 4% by early next year and hold it there,” Mester said.
“I do not anticipate the Fed cutting the fed funds rate target next year.”
Her remarks echo those of Fed Chairman Jerome Powell in his speech last Friday. New York Fed President John Williams delivered similarly hawkish commentary yesterday.
Worse yet was this morning’s Eurozone CPI release, which revealed a hotter-than-expected inflation print. European prices rose 9.1% year-over-year (YoY), beating the +9.0% YoY estimate. Goldman Sachs analysts are now forecasting a 75 basis point rate hike from the European Central Bank at its September meeting.
“We now expect the Governing Council to hike by 75bp at the September meeting. First, today’s inflation data surprised further to the upside, with headline HICP climbing to 9.1%yoy and, importantly, core HICP rising to 4.3%yoy, in another strong sequential monthly print,” wrote Goldman Sachs strategists in a note to clients.
“We expect inflation pressures to rise further in coming months as the 9-Euro ticket in Germany ends and high energy prices feed through into retail prices, with a peak in core inflation at 4.6% in September and headline inflation close to 10% in Q4.”
The only bullish silver lining today was that the S&P (as represented by the SPY) has now fallen so much, that it’s approaching support at the late June high. This may very well serve as a rebound point moving forward.
On the other hand, the S&P took out yesterday’s low after closing below the 50-day moving average. That would qualify as a longer-term bearish breakout, and it would be triggered right near support.
Sadly, it looks like things are only going to get worse for bulls from here.
Marathon Petrol Company (NYSE: MPC) is in a similar boat after closing below its bullish trend (yellow trendline) and the 10-day moving average yesterday. This morning, it triggered a short trade at $100.19 before rallying.
The stock ended up closing just below its trade trigger, but could easily head higher and fill a trade at $100.19 for anyone who missed out on it today.
The stochastic indicator is also showing that MPC has plenty of room to fall. The presence of a lower high relative to the early June high is yet another bearish signal.
For those reasons, it might make sense to take MPC short with a trade trigger at $100.19, slightly above today’s close, as the general market approaches key support and a longer-term bear trigger.
