Why the stock market might see ‘further choppiness’ in October

On Oct 2, 2021

Dave Mazza, Managing Director and Head of Product at Direxion, joins Yahoo Finance to discuss what to expect from the stock market in headed into October.

Video Transcript

– And I want to stick on the markets here and also on that econ data. And for that, we’re going to bring in Dave Mazza. He’s a Managing Director, Head of Product at Direxion. And Dave, thanks for joining us today.

I just want– you heard what Emily was saying about the numbers that we got this morning. There’s a huge debate raging about inflation. Powell says it’s transitory I don’t believe him. But what’s your take on all these numbers?

DAVE MAZZA: I think your stance about not believing him it’s becoming a bit more of consensus here, is it’s getting harder and harder to show at least from a data perspective that inflation is indeed transitory or exactly what is that particular mean. I think what’s notable though, is that we’re seeing markets really try to digest this. And in many ways, all it’s doing is adding fuel to the fire for the inflationary trade, which has come back into place since the last FOMC meeting.

So what we did is, well, we have rate rises being pushed out to 2023 but at the same time the economy sort of getting– getting hot again. And it’s difficult to see the Fed necessarily moving quicker than what they’re telling the market. But at the same time, investors cannot ignore the inflation data right now.

– Well, and then I just want to get your take on the current market environment. We are down about 5% in the S&P 500. I was talking with a guest earlier today– we haven’t had one of those 5% corrections all year long. How far down could we go in here? Or do you think the worst might be over?

DAVE MAZZA: Well, to your point, investors have been asking and calling for a correction particularly this 5% number because it hasn’t happened through most of the year. And really the previous year investors bought any dip that they could, whether it’s 1%, 2%, 3%. And September kind of finally gave us– gave us that.

This last week’s trading environment has been extremely choppy. I expect to see some further choppiness into October simply from a seasonal perspective. And we’re heading into an earnings season that’s going to have really, really high expectations just as we’ve seen in the past. So I expect markets– until we kind of get some clarity from some of the early reporters, the banks again are coming up in a few weeks, it’s going to be difficult to really see markets settle. So I expect markets could fall another few– a few percent here. But I do think right around earnings season we’re going to see that kind of find some stability.

– Well, and this kind of ties into discussion around the bond market. If we could pull up the Wi-Fi interactive, I have a chart of the 10-year T-note yield. And it broke up to relatively recent highs only a few days ago. We’re off those highs right now.

But when we see rates moving higher like this on the long end typically…