Markets are higher this morning as they wade through some coronavirus fears from Europe. This comes after a mixed session into the afternoon, weakness from the NASDAQ on declines in tech spilled over to the broader indexes which closed in the red. The NASDAQ underperformed and posted a -2% decline. The S&P 500 slipped -0.55%, and the Dow was off fractionally.
An increasingly cautious outlook on another wave of virus combined with a late slide on Wall Street to give Treasuries a little boost Wednesday. The bond market closed with yields moderately lower with the 10-year at 1.612% and the 30-year at 2.313%. An ok 5-year auction also left bond bears sidelined for now, especially in the wake of Fed Chair Powell’s reiterations that policy will remain accommodative and that he is not concerned about rising rates, as long as it’s orderly, and higher inflation.
There are three things pushing the market bullish:
- The Fed said most banks that passed stress tests will be allowed to raise both buybacks and dividends at the end of June.
- Biden increased his previous vaccination target by 2x, calling for 200 million for the first 100 days.
- US coronavirus vaccinations rose to more than 133 million, with a daily average of 2.51 million doses administered over the last week. Florida will be lowering the age limit to 18 in the coming weeks.
The markets will continue to monitor the worsening in the pandemic in Europe, though Chancellor Merkel walked back on the restrictions she had announced. And the EU and UK are reportedly trying to work out a spat over vaccine exports. There is more Fedspeak today with Williams, VC Clarida, Bostic, Evans, and Daly all slated, but none will alter the dovish outlooks.
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Weekly jobless claims are on tap, with initial claims expected to fall 30k to 740k while continuing claims are forecast at 3.930 mln from 4.124 mln. Also, the third release of Q4 GDP is expected to show a pick up in growth to 4.6% from 4.1%. Q4 after-tax corporate profits are seen falling -20.0% from up 20.7% previously. The Treasury will auction $62 bln of 7-year notes. The only larger-cap earnings reports are from Darden Restaurants and Viatris.