Are Stock Bulls in Control Now?

Stock bulls believe markets have gotten oversold, but bears argue the CBOE VIX Index, aka the investor “fear gauge,” which last week moved back above 30 for the first time since the last big selloff in June is still nowhere near the levels its has risen to when signaling the end of the other most recent bear markets. Stock bears are also pointing out that this week’s upswing comes as major global banker Credit Suisse is experiencing liquidity troubles that some fear may not be limited to just the one institution.

Is Balance Sheet Still an Issue?

Overall liquidity in the financial system has become somewhat of a concern as of late with some thinking it could become even more problematic as the US Fed continues to draw down its balance sheet and the market is flooded with more US Treasury debt than the system might be able to handle.

Many on Wall Street seem to think the market will continue to struggle until we start to see at least one or more of the major headwinds recede, such as an undeniable decline in inflation, a Fed policy pivot, a ceasefire in Ukraine, or a turnaround in wage growth.

Data to Watch

Today, investors will be listening closely to remarks from several Fed officials, including Cleveland Fed President Loretta Mester, known as being one of the most hawkish members, as well as San Francisco Fed President Mary Daly, who tends to be among the more dovish members.

Some insiders have been noting signs of division starting to form among Fed officials as concerns grow that the central bank might be slamming the breaks on too hard.

Investors today will also be digesting the Job Openings and Labor Turnover Survey for August. The number of job openings has been near record levels at over 11,000 for all of 2022 so far, which works out to nearly 2 jobs for every unemployed American. That’s in turn kept upward pressure on wage gains which are currently climbing at a rate of more than +5% year-over-year.