Stocks Up Three Days In A Row

Key Takeaways

• Oil Price Decline Alleviates Inflation Concerns, Offering Market Relief
• Flight To Quality: Bonds And Gold Remain Safe Haven Assets
• Market Anticipates Federal Reserve Minutes And Corporate Earnings Releases

The rally in equities that began last Friday continued through Tuesday. The S&P 500 gained 0.5% with ten out of the eleven sectors higher on the day. The Nasdaq Composite was also up, closing higher by 0.6%. Bonds participated in the rally as well, having their best day since August. In premarket activity, both the S&P 500 and Nasdaq Composite are higher by just under 0.5% while bonds are up over 1.3% with the yield on the 10 year note at a two week low.

Oil, which had traded as high as $95 just a week-and-a-half ago has since fallen, closing on Tuesday at $85.97/barrel. That has led to lower prices for gasoline. According to AAA, the average price for a gallon of gas is $3.66, down from $3.83 just a month ago. The drop in prices is welcome news for markets, helping alleviate fears inflation will pick up, forcing the Federal Reserve to raise interest rates.

Since war broke out in Israel, we have seen investors flock to traditional safe havens such as bonds and gold. Bonds have rallied nearly 4.5%, while gold is up over 3% since last Thursday. We’ll see if bonds continue to rally in the wake of today’s stronger than expected Producer Price Index. Then later today, we’ll get the minutes from the most recent Federal Reserve Open Market Committee (FOMC) meeting.

There are a couple individual stocks making news this morning. Walgreens Boots Alliance
WBA
named Tim Wentworth as its new CEO and will announce earnings tomorrow morning before markets open, along with Delta Airlines and Dominos Pizza. Exxon Mobil reached an all stock deal to purchase Pioneer Natural Resources
PXD
for close to $60 billion. That values Pioneer 7% above its closing price on Tuesday. GM reached a deal with the Canadian Auto Workers which may give hope a deal can be reached with United Auto Workers. Then finally, Birkenstock will begin trading publicly today after pricing its IPO at $46 per share (sweet, Dude).

For today, I’m watching bonds and how they react in the wake of today’s stronger than expected PPI. The recent rally has sent yields sharply lower, dropping the odds the Fed will raise interest rates next month to under 11% and a less than 30% chance rates will be raised in December. I’m also watching VIX which has contracted 16% since Monday. As always, I would stick with your investing plans and long term objectives.

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