Wall Street tumbled yesterday, led by the NASDAQ’s 2.7% plunge as the rise in rates puts the high valuations in doubt. The S&P 500 dropped was and dropped -1.3% and the Dow fell -0.39%.
The jump in Treasury rates made for more nervous trading on Wall Street, though there were not the jitters seen back on February 25 when longer yields surged 20 bps intraday. The combination of reflation trades on an improving outlook on the recovery and some pick up in inflation expectations resulted in the 10-year rate closing 9 bps cheaper at 1.48%. It had surged to test 1.49% intraday. The 2-year was up 2 bps to 0.141%.
Key Market Drivers:
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- U.S. calendar focuses on Fed Chair Powell speech, weekly jobless claims
- Canada data calendar has productivity data – expected to drop -2.0% in Q4
- Dollar firmer after latest Treasury yield jump; Aussie, Kiwi dollars outperforming
- EGB and Treasury yields moved off highs, stock markets sold off
- Eurozone retail sales contracted -5.9% m/m in Jan, unemployment steady at 8.1%
- Treasuries stabilized, but stock market sell-off intensified during Asian hours
Today’s focus will be on Fed Chair Powell’s comments (at a WSJ event) to see if what he has to say about the run-up in yields. We suspect he will continue to deliver the message that policy will remain accommodative until substantial progress is made on the employment and inflation goals. And he will continue to stress that there is a long way to go before the labor market is back to pre-pandemic levels.
As for data, weekly jobless claims highlight. Initial claims are expected to dip 10k to 720k while continuing claims are seen at 4.380 mln from 4.419 mln. Q4 productivity is expected to be revised to -4.7% from -4.8%. January factory orders should rise 2.5% versus the prior 1.1% increase, while inventories are penciled in at up 0.1% from 0.3% previously.
February Challenger layoff figures are also on tap. The Treasury announces 3-year notes, along with reopened 10-year notes, and reopened 30-year bonds. The earnings calendar has Broadcom, Costco, Canadian Natural Resources, Kroger, Cooper Companies, Burlington Stores, Toro, and National Beverage.