Presidential Debate Little Impact on Market

Stocks opened modestly lower, but quickly erased morning losses and are bit higher into midday Tuesday. The S&P 500 is up 5.25 points to 2151.35 and 10 points from session lows.

Treasury bonds are seeing modest gains despite a surprisingly strong reading on Consumer Confidence, which printed at 104.1 for September and well above consensus estimates of 98. Nevertheless, the yield on the benchmark ten-year, which moves opposite to the price, dipped and is at three-week lows of 1.56%.

Crude oil is off $1.56 to $44.37 and now modestly lower on the week after big gains Monday. Gold gave up $14 to $1330.

On Wall Street, seven of ten market sectors are higher, led by Tech (XLK), Consumer Discretionary (XLY), and Financials (XLF). Energy (XLE) is the notable laggard.

CBOE Volatility Index (VIX) is down 1 point to 13.50 after a two-day 2.5-point jump. Yet options volumes are a bit light, with approximately 2.75 million calls and 2.60 million puts traded through the first two hours. Projected volume for the day is 13.1 million and almost 20% less than the one-month daily average.

XLE Jan 75 calls, Bank of America (BAC) Oct 7th Weekly 16 calls, and VIX Oct 25 calls are among the most actives.

Looking forward, the earnings news flow is light over the next two weeks and until the kick off of the third quarter reporting period, but the economic calendar is chock full of data, concluding with key jobs data at the end of next week.

Meanwhile, although the Presidential debate garnered a massive audience, it seems to have had little market impact. Instead, recent weakness in stocks and strength in bonds has a lot more to do with events in Europe.

Namely, the financials are reeling amid capital concerns and the anxiety is weighing on Eurozone equities markets. As evidence, the Vanguard FTSE Europe Fund (VGK), which holds a basket of names from diverse industries, has suffered several days of notable losses. As we can see from the chart below, the three-day 2.5% decline has led to a decisive break of the 50-day moving average and the ETF is now testing support/resistance at $48 per share.

See Tradespoon’s Stock Forecast on Vanguard Europe ETF (VGK)

Tradespoon’s Stock Forecast on Vanguard Europe ETF (VGK)

The volatility in equities market across the pond seemed to be spilling over into US assets Friday-Monday, causing the big spike in VIX, a rally in Treasury bonds, and a two-day 31-point drop in the S&P 500.

The S&P is rebounding midday Tuesday but faces resistance at 2154, 2164, and along the 50-day moving average. Support likely at 2150, 2144, and 2140.