Even in a bear market FOMO is a major force
The big picture: Stocks rallied sharply, despite a worse-than-expected inflation report that all but ensured the Fed’s relentless rate-hiking would continue.
• As we’ve written about all year, rate hikes have been the key driver of what, through Q3, has been the worst year for the stock market since 2002.
• And the S&P 500 did, in fact, plunge after the inflation report, opening down 2%.
• It was only the fifth time since 1993 that the S&P 500 opened down 2% only to close with a gain above 2%, data from stock market research firm Bespoke Investment Group shows.
• Stocks that benefit from ongoing inflation and rising interest rates, like financials, oil drillers and chemical companies, led the market higher.
• Bear market rallies are the brief, sharp increases that regularly happen, even as the market’s broad trajectory is lower.
Sometimes Wall Street makes sense. Other times, it doesn’t. Thursday was the latter.
The big picture: Stocks rallied sharply, despite a worse-than-expected inflation report that all but ensured the Fed’s relentless rate-hiking would continue.
• As we’ve written about all year, rate hikes have been the key driver of what, through Q3, has been the worst year for the stock market since 2002.
• And the S&P 500 did, in fact, plunge after the inflation report, opening down 2%. However, it then boomeranged, closing up 2.6%.Context: Yes, stocks go up and down all the time. But the size of the swing from the opening tick was highly unusual.
• It was only the fifth time since 1993 that the S&P 500 opened down 2% only to close with a gain above 2%, data from stock market research firm Bespoke Investment Group shows.
• Stocks that benefit from ongoing inflation and rising interest rates , like financials, oil drillers and chemical companies, led the market higher.Between the lines: While the composition of the day’s winners could be construed to make a kind of sense, no traders that we talked to seem to view the rebound as fundamentally sound. They all think it was a classic bear market rally .
• Bear market rallies are the brief, sharp increases that regularly happen, even as the market’s broad trajectory is lower.
• You can still make a lot of money on a bear rally, though, especially if you spot it early, surf it well and jump off before it rolls over.
• Steve Sosnick, chief strategist at Interactive Brokers, called Thursday’s move “an epic head-fake,” adding that fear of missing out — or FOMO — is still a major force, as traders are dying to get in early on a good bear market rally .The bottom line: Some traders we spoke to thought stocks could put together a decent little rally before the shadow of the next rate hike — due on Nov. 2 — begins bumming the market out again.
