New World Near

Today is Columbus Day, meaning that banks and bond trading were closed in the U.S. For that reason it is difficult to place much significance on today's action. Equity benchmarks drifted lower, led by materials and energy. We continue to see a pattern trend of recent laggards becoming leaders, and vice versa. This suggests that the market is near a turning point of some kind. Exactly what is turning, and where, is not entirely clear yet.

Friday was much more interesting than today. The monthly jobs report revised away the August weakness and showed a level of economic strength most analysts were not expecting. The conventional wisdom is that the Fed is less likely to reduce interest rates if the economy is strong. Sure enough, Fed funds futures quickly adjusted to show reduced odds of another cut at the next policy meeting on October 31. Yet the stock market, which is generally presumed to consider lower rates as a positive factor, rallied anyway. This allowed the S&P 500 to finally close at a new high, as other benchmarks had already done in recent weeks.