Equities got some relief Thursday, following a steep sell-off in the previous session on the back of the Federal Reserve’s quarter-point rate increase and comments from Chairman Kevin Warsh on the risks posed by persistent inflation. The rebound may be short-lived. U.S. stock benchmarks rallied in early trading as Treasury yields fell broadly alongside oil prices. The Dow Jones Industrial Average jumped around 300 points on the day, after falling more than 600 points on Wednesday. The S & P 500 and Nasdaq Composite gained 1% and 1.3%, respectively. Tech led Thursday’s advance in equities, as lower bond yields gave the group a boost. Yet Citadel Securities and JPMorgan traders think investors may be mistaken dipping back into stocks at this point. .DJI 5D mountain Dow 5-day chart “The supply/demand setup into month-end remains unfavorable, the technical backdrop is still working against equities, and we continue to think equities can trade lower over the next two weeks,” wrote Scott Rubner, head of equity and equity derivatives strategy at Citadel Securities. “For the remainder of September, several important sources of demand are either fading or already deployed, while the potential sources of supply are increasing,” he added. September has historically been the weakest month for stocks. Since 1950, the S & P 500 has averaged a 0.7% decline in September, according to the Stock Trader’s Almanac. JPMorgan’s trading desk is also treading carefully. ‘”For now, we maintain our Tactically Cautious/Neutral view. What would flip our view to Bullish? Lower oil/bond yields,” they said. “We think the most likely outcome is that we get what we need from Fedspeak and the Middle East and move higher; however, timing remains uncertain and positioning suggests more downside can come if uncertainty prevails.”
