The indexes were choppy and messy on Thursday and ended the day with losses. But there was also some interesting action under the surface.
Traders briefly celebrated higher-than-expected weekly unemployment claims, as they are looking ahead to the September jobs report, which is due out on Friday morning at 8.30 am ET.
The reason that the jobs report is important is that bulls are hoping that if the report is weak that it will push the Fed to pivot to a more dovish stance sooner rather than later. The bears are scoffing at this hope, however, as the Fed has already made it very clear that it is going to take much more data than any single report to cause them to relent in their fight against inflation. The bulls have been using this hope for a pivot to justify market strength, and that is why they keep being disappointed, and we see lower lows.
Under the surface today, breadth was around 2-to-1 negative, and there was endless coverage of the Twitter (TWTR) deal, which hit a snag due to financing issues. Oil was the leader Thursday as OPEC supply cuts are ready to hit.
Late in the day, President Biden announced that he was pardoning all prior federal offenses of simple marijuana possession. However, what is important for pot-related stocks is that the president is also reviewing how marijuana is treated under federal law. While marijuana is legal in many states, it is still treated as equivalent to heroin at the federal level. As a result, legal marijuana businesses cannot be fully listed on U.S. stock exchanges and face financing and banking issues.
This news was expected at some point, but traders were caught by surprise by the announcement today. Pot-related stocks flew higher, with the AdvisorShares Pure US Cannabis ETF MSOS ETF (MSOS) jumping 34%.
There will be some interesting trading in the cannabis sector as this issue advances. It will take some time for rules to be changed, but this is the catalyst the sector has anticipated for so long.
Have a good evening. I'll see you Friday.
