JD Durkin: Michael Reinking, Senior Market Strategist here at the New York Stock Exchange. Good friend of ours, good friend of mine. My man, thank you for being here today.
Michael Reinking: JD, thanks for having me.
JD Durkin: So what did you see in terms of this reversal? It’s interesting. You and I can look up and you see the up all day, but the Dow was kind of down shortly after the open. We saw more of the kind of hyperscaler AI trade catch a bid around 10 a.m. What do you make of the first day of the week?
Michael Reinking: Yeah, I mean, I think it’s really some optimism related to the Giants’ 3-1 start.
JD Durkin: Probably a good reason.
Michael Reinking: Hopefully a comeback from the Yankees tonight after a bad Game 1.
No, I mean, interestingly enough, today’s market performance, we saw some pretty broad-based gains. There wasn’t really a clear catalyst in terms of why markets kind of really improved. We did see oil prices back off a little bit throughout the session, but Treasury yields continue to move higher.
But if you look back to last week and you look at kind of the equal-weight version of the S&P 500, some of those small- and mid-cap indices, they all kind of pulled into these technical levels right around their 200-day moving averages. And I think we’re still seeing kind of some of the impacts of the quarter-end flows, kind of moving into areas of the market that have underperformed.
JD Durkin: Yeah. Right now, in the equal weight, it looks like for today’s tape, nine equal-weight sectors still in the green. Maybe a couple others were down fractionally. So kind of strong to maybe suggest a bit of broadening out.
Michael Reinking: Yes.
JD Durkin: More broadly, not just the generals leading the pack. It is a light week on the economic data front. How do you approach a week like this? We don’t really get those big pop catalysts, no splashy inflation print. What are the things for traders to look for in the short term?
Michael Reinking: Yeah, I mean, unfortunately, in this kind of tape, you’re very much beholden to all the headlines that continue to come out from the Middle East.
But I think beyond that and kind of watching Treasury yields, we do have a couple of bond auctions which are going to be closely watched. So we have the 10- and 30-year bonds, particularly in the current environment where yields have been such an issue. That’s going to get a lot more attention on a light week.
And then I think you just kind of pay attention to levels, technical levels. You have the S&P 500 within 1% of its all-time highs. So can we actually challenge that? We’ve continued to hold above the 50-day moving averages.
And then you have those underperforming areas of the market that we just talked about. See if they can actually get some separation from the 200-day moving average. Do we come back in and kind of retest those levels?
JD Durkin: We are inching a little bit closer, but I think four weeks from tomorrow will be the November midterm elections. Up until now, maybe not something traders have had at the forefront of their points of focus, but maybe that starts to change and shift here in the next few weeks. What do you follow on the politics front we should pay attention to?
Michael Reinking: Absolutely. So if you think about things purely from a seasonal perspective, we had talked, I think I was on air with you talking about the final two weeks of September being the worst two-week period of the year.
If you look in midterm election years, the calendar, the seasonality gets much better. Historically, October and November do tend to be some of the best months, though I will preface that by saying that during October, leading into elections, you do often see a little bit of volatility in that sort of time frame.
But then when you look forward within the four-year presidential cycle, Q4 of this year and Q1 and Q2 of next year are the best three quarters for markets from a performance perspective.
JD Durkin: I do have less than a minute left. Before we get to the November midterms, we have another Fed meeting October 23rd. What do you think they will be watching between now and then? We’re not quite near there yet in the news cycle, but you and I will be talking about it before we know it.
Michael Reinking: Yeah. So, look, last week we had a jobs report which, on the headline basis, looked a little bit weaker. But if you think about where economists are, we saw 23,000 jobs added to the economy. That’s kind of in the middle of where they believe break-evens are.
We did see the unemployment rate tick up, but that happened because labor force participation increased. So that’s for a good reason. It’s not a bad reason for the unemployment rate to move higher.
We did get some dovish comments from Fed Williams, who is one of the more influential Fed presidents, or one of the Fed presidents that’s the most influential. When he spoke, we saw odds of a hike kind of move back below 50%.
We’re going to be closely paying attention to the CPI data. I think that’s next week. That’s going to really be kind of one of the key drivers for what happens.
JD Durkin: And I hope when it is CPI day, you’ll come back on the show.
Michael Reinking: Absolutely.
JD Durkin: I always learn so much from talking with you. We’ll see what those Yankees got tonight in Game 2.
Michael Reinking: Yeah. Well, we got Littler on the mound, so—
JD Durkin: Littler. All right, let’s go. Talk to you soon. Michael Reinking, thank you.
