Look for consolidation in the markets after fresh record highs on Wall Street and after sharp cheapening in Treasuries. Indications that a stimulus deal is making some progress have added to the positive developments on vaccines boosted risk appetite last week that saw the Dow rally 0.83% to 30,218, while the S&P 500 advanced 0.88% to 3699, and the NASADQ advanced 0.70% to 12,464.
The chart above shows a strong bull trend for the S&P 500 and we believe it should continue if the vaccine rollouts are successful and Congress passes another bailout. It may dip on negative news, but we think it should hold on the the 3600. A drop below 3400 and rise in the VIX could signal a bear trend.
Rising virus cases and tightening in restrictions should see investors take chips off the table, especially with year end fast approaching. Meanwhile, the cheapening in Treasuries saw the wi 10- and 30-year yields climb to With rising to 1.74% and 0.985%, respectively. That rise in rates should help underpin demand for this week’s $118 bln in 3-, 10-, and 30-year auctions.
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The calendar is light today and pretty thin for the week. Today’s slate has October consumer credit, expected to expand by $18.0 bln from $16.2 bln previously. The earnings calendar is light, featuring reports from BHP, and Coupa Software. The Treasury will auction 3-, 10-, and 30-year paper beginning Tuesday with the shorter maturity. The data highlights this week are the CPI and consumer sentiment releases.
Key Drivers for the Week of Dec 7 – Dec 11
TIP – This is a 1 minute brief bullet-point summary as a tool that gives them a fast and simple list of what to watch for and talking points.
· Longer dated yields equities on the rise amid vaccine development, stimulus hopes
· Treasury bond rate tests 1.75%, highest level since March
· Wall Street at record highs with Dow at 30,218 and S&P 500 at 3699
· ECB likely to strengthen PEPP, TLTRO programs, but hawks may limit uber-easing
· Brexit remains on knife edge amid amid “irresolvable” differences on fishing
· U.S. calendar has CPI, PPI, consumer sentiment; $118 bln in coupon auctions
· Bank of Canada expected steady at 0.25%; Beaudry gives Economic Progress Report
· China trade, CPI, PPI, loan data; Japan Q3 GDP, PCE, core machine orders due
· German ZEW investor sentiment, industrial production, trade; Eurozone Q3 GDP
· UK industrial production, trade, second release of Q3 GDP due