Calming Markets Pay Benefits Even If Small For Now

Although nothing spectacular was achieved, gold, silver and U.S. equities found firmer footing today. The VIX volatility index reflected the situation, falling 3.50%, close to the 17.00 mark, after having zoomed up from 12.00 to 18.00 in the previous five days.

Gold’s modest rise was firmly anchored to a softer U.S. dollar. There was only scant movement because of regular trading. Silver ran the opposite way. Regular trading accounted for almost two-thirds of its gain and dollar weakness for slightly more than one third.

Except that we are seeing a bit of sobering up after last Thursday and Friday’s lurching and careening, there seems to be no particularly solid fundamental reason behind the pause in the selling off.

The Dow and S&P 500 had been clinging to negligible gains all day before turning red, whereas the NASDAQ is experiencing a bit more solid uptick. The tech-heavy NASDAQ had been up by as much as 1.00% on new strength from Apple, but the overall index has since fallen back so that it is up only 0.35%.

A pair of data points released today might have had a strong influence on stock prices in an indirect way. Import prices for August fell 0.2% against an expected 0.1%. In the 12 months through August, import prices fell 2.2%, having been constrained by a robust U.S dollar and persistently cheap oil. Export prices also fell.

This only adds to the uncertainty that is now on the horizon concerning the direction of the presidential elections. Individuals may have personal choices, but the market likes consistency. Hillary Clinton’s slide in polls is definitely on Wall Street’s mind.

Speaking of oil prices, West Texas Intermediate crude closed off almost 3.00% having quickly crashed through the $45-per-barrel level and then in short order, through the $44 line. This distinctly does not bode well for those who are looking for stronger inflation and thus for believers in higher interest rates. Brent North Sea crude was off about 2.45%. Both oils rose in after-hours trading.

The yield on the 10-year U.S. bond fell back below 1.70%, indicating that bidding in that area was more controlled and that points toward a belief that rates will stay the same.

Speaking of rates, the folks at the CME who make the bets on whether rates will rise next Wednesday are still saying that the chances of a hike are only about 15%. That’s the same probability as yesterday’s and down 9 points from Monday’s outlook.

Wishing you as always, good trading,