Fed Rate Hikes – Mixed Action On Friday

Before delving into Fed rate hikes, let’s review Friday’s market action. With all the volatility in the past few weeks, it appears investors aren’t focused on the midterm elections.

At worst, I think the election won’t affect stocks. At best, it will inspire a big rally. Stocks were mostly down on Friday. That was because of the high wage growth in the BLS report. It was also because of Apple’s weak earnings, not the election.

The S&P 500 fell 0.63% and the Nasdaq fell 1.04%. Apple dragged both indexes lower as it fell 6.63%. The Russell 2000 was up 0.19%.

This potentially shows what the market could have looked like without Apple. Since I think wage growth was also a negative, gains would have been amazing. The CNN Fear and Greed index is still in the single digits. It increased from 6 to 8 which signals extreme fear. I’m very bullish on stocks in the short run.

The other major news was on tariffs. There were swings in the headlines. At first President Trump claimed America and China are close to a deal. Then Trump’s top economic advisor, Larry Kudlow stated, “There’s no massive movement to deal with China. We have already put out asks China with respect to trade”.

Politics could be playing a role in the statements on trade. This administration wants to assure the public that things are going well with negotiations right before the election. If investors really believed a deal was imminent, the stock market would spike over 3%.

The worst sectors were technology and real estate. Apple missed earnings and the wage growth report causes treasury yields to spike. The tech sector was down 1.89% and the real estate sector was down 0.93%.

Two positive sectors were the financials which increased 1 basis point. And the other was consumer discretionary which was up 0.41%. Strong wage growth is great for consumers. Accelerating wage growth and stable inflation is a recipe for sharp real wage growth.