Many disagree with the Fed's approach to hiking (or normalizing) rates. We've discussed investors' view that the Fed will pivot away from rate hikes and adopt a dovish policy several times in recent months. And each time, I criticized that train of thought. When folks such as San Francisco Fed President Mary Daly and Atlanta Fed President Raphael Bostic tell you that rates are headed higher and the Fed shouldn't be cutting rates anytime soon, which is what happened Thursday, we should probably listen.
We hear the same story unravel every time. One or two reports show the pace of inflation moderating, or maybe commodities dip, or home prices contract. Suddenly everyone is bullish because, undoubtedly, the Fed sees this inflation decline and will replace the punch bowl it so rudely kicked over in March. I'm not an economist and wouldn't become one if I had college to do all over again. But it seems pretty clear that we should take the Fed at its word and trust its members when they say they want rates higher, and for longer than the market is currently expecting.
From a trading standpoint, Thursday's regular session was very dull. Neither the SPDR S&P 500 ETF (SPY) nor Invesco QQQ Trust (QQQ) broke outside the range of the prior two sessions. While both ETFs closed beneath the volume-weighted average price (VWAP) anchored to Tuesday's open, Thursday's price action didn't provide us with any new, worthwhile information.
During Thursday's regular session, one sector-specific noteworthy development was the news flash that President Biden will pardon thousands of folks sitting behind bars in US prisons due to marijuana possession convictions. According to the president, our current system makes no sense, and it's time to do something about it.
I, for one, would love to know why the president took so long to conclude that the system is broken. I remember him providing a different narrative while on the campaign trail -- as in, he'd do something about non-violent cannabis convictions immediately upon entering the office. I'm sure the forthcoming midterms didn't factor into his decision (eye roll).
A quick note on Thursday's after-hours trading...
Advanced Micro Devices (AMD) issued preliminary third-quarter results yesterday afternoon, and they weren't pretty. Revenue came in at around $5.6 billion when the company previously guided the street toward something closer to $6.7 billion. Margins also missed the mark by a wide margin.
As you'd expect, this stinker of a report sent shares of (AMD) , the VanEck Vectors Semiconductor ETF (SMH) , other semiconductor stocks and QQQ lower during the after-hours sessions. On the plus side, this weakness might not matter if we get a jobs report that the street likes here on Friday morning. That said, AMD is one more indication that demand is slowing materially; in all likelihood, its warning is a sign of what's to come over the next few weeks.
I'll be in Las Vegas next week, attending the Web 3 Expo at the Wynn Las Vegas. While I'll try to keep tabs on the market and a few open positions, my morning notes will be sporadic. I'll be at my desk full time again on Monday, Oct. 17.