10year chart

Markets Mixed Before The Bell (10-Year Treasury Rises)

The futures market is mixed to slightly bearish this morning after yesterday’s high-flying NASDAQ plunged -3.5%, with the S&P 500 closing with a -2.45% loss, and the Dow dropped -1.75%. Trading will remain nervous and jumpy into the weekend. A month-end rebalance could add some volatility too.

The speed and extent of the selloff in bonds and stocks surprised investors and contributed to the overall sense of panic in the downturn.

While Fed officials view the rise in rates as a “good” thing, reflecting increasing confidence in the recovery, the stock market saw the jump bearishly as it will weigh on valuations.

If the recent past has been any indication, we can expect the Fed to buy equities in order to prompt up the markets.  

This will cause the markets to stop dropping or maybe go up, but it is only a temporary fix and lead to more inflation which is the root cause.

The 20 bp spike in longer-dated rates to over 1.60% on the 10-year and 2.39% on the 30-year which are now equal to or above the 1.48% dividend yield.

Key Market Drivers

  • U.S. calendar has personal income, Chicago PMI, consumer sentiment
  • Canada data calendar has IPPI numbers for January
  • Dollar and yen up on safe bid amid coursing risk-off positioning
  • Bunds and Treasuries have been supported, Gilts and stocks sold off

Data will be monitored but positioning could be more important for the markets today. January personal income and consumption numbers will highlight, with the former seen surging 11.4% from 0.6% as stimulus checks hit accounts and the latter up 2.5% from -0.2%. Strong gains could be one more factor adding to the more positive tone on the economy.

The February Chicago PMI is penciled in at 60.0 from 63.8, while the final University of Michigan consumer sentiment index is forecast at an unchanged 76.2. Also there is the January advance goods trade report with the deficit seen narrowing to $81.7 bln from 83.2 bln.

Advance January wholesale and retail inventories are due as well. January agriculture prices are out late in the day.

The earnings calendar slows to end the week, but features reports from Berkshire Hathaway, Liberty Broadband, and Icahn Enterprises.

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