Market Has First Week Up After Three Down, Dollar Reversal Spurs Risk Rally In Equities

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Stocks ended up this week up after three straight weeks down. Shortly after opening, the S&P 500 moved above its 100-day moving average. It was a risk-on rally led by Communication Services, Energy, Technology, and Consumer Discretionary respectively. The Nasdaq outperformed and Bitcoin also took off, climbing about 10%. The Russell 2000 also outperformed this week. The dollar retreated from recent highs and the 10-yr retreated earlier in the day and then went back up into the close. Stocks ended up closing near their highs of the day. There is a Fed meeting on September 20-21 and it now appears that a 75-bps hike is likely based on Fed Futures. Next week's CPI reading will likely be a consequential data point so probabilities may change between now and then. Economists have begun to revise inflation forecasts downward.

Data from EPFR Global showed nearly $11 billion in equity outflows in the week to September 7th. Technology led the outflows accounting for about 16% of the selling. Sentiment has reached extremely bearish levels. The selling has been significant since Jackson Hole, but it has also been relatively orderly compared to prior run-ins with a hawkish Fed this year. Markets rallied despite the continued expectations for hawkish Fed actions. Powe...