The market is in a holding pattern as it awaits the Federal Reserve interest rate decision on Wednesday afternoon. This will be one of the most important decision by the Fed in years and market players are carefully positioning themselves for the reaction.
While we wait for the news there are a few other issues that are attracting attention. The most important is Apple (AAPL) earnings after the close tonight. Back in the Steve Jobs days Apple was notorious for low-balling guidance and producing blow-out reports. That is no longer the case and there have been some disappointments in recent years. Expectations are fairly high and the stock is close to challenging the May highs. A good report should push it to new closing highs.
The reaction to Apple's earnings will tell us something about the market's inclination toward a 'sell the news' reaction but attention will immediately shift to the Fed decision that is due at 2 pm ET on Wednesday. This is one of the most significant 'sell the news' setups that market has seen in a while and it will be very instructive to see how it develops.
In addition to Apple and the Fed, there should also be some news out of China as trade negotiations resume. The market has not been very optimistic about progress recently so any positive headline could have a significant impact. The general view now is that it will take many months for anything to be resolved and the empty platitudes from politicians aren't having much short term impact.
One less important matter that is attracting attention this morning is Beyond Meat (BYND) which posted its first earnings report since its IPO. The company posted strong revenues and indicated that it is on track for great growth but the stock was up over nine-fold since its IPO at $25 back in early May. There is simply no way that sort of move is justified on a valuation basis and the company is obviously aware of that as it is issuing a secondary which primarily allows insiders to unload shares and lock in some significant profits.
As I've discussed in the past, trading in BYND is like a Ponzi Scheme in some respects. All that mattered was that traders were confident that other traders will be willing to pay higher prices and ignore all those arguments about valuation. Now that the company has to price a secondary offering, it becomes much harder to simply ignore valuation. Institutional buyers will not view the stock as a trading vehicle like the short-termers that have dominated the action in the stocks since its IPO.
Since they have had so much success with BYND, traders are not likely to give up on it too easily, but the character of the trading action is very likely to shift now. It will be interesting to see how it acts going forward. Just take a look at what happened to Tilray (TLRY) after that bubble popped.
The market is set up for a soft open and it is likely to be another dull day of trading before the Fed Fireworks on Wednesday.