With some more reassuring communication from the Fed, volatility in traditional markets remains and continues to go to very low levels. Equities continue to rise. The S&P, now decidedly above $4,000, rose another 0.5% yesterday. The Nasdaq and Dow continue to rise as well. Gold finally bounced back, rising over 1% yesterday.
It’s an interesting day to look at market dynamics. With the Fed’s relaxed stance on inflation risks, investors felt confident buying equities and selling bonds. The S&P and the Nasdaq edged higher (currently at record levels), yields remained around 1.7% and the USD gained.
BTC is currently at $58,000 (surprisingly close to where we were before the weekend). The hashrate has hit a new all-time high, though, typically a signal that pushes us higher.
The headline today is, of course, President Biden’s infrastructure plan (over $2 trillion worth of spending). Investors regained some optimism and favored tech-heavy indexes such as the Nasdaq and the S&P. It’s worth noting that bonds continue to be sold, pushing the 10-year yield to 1.75%. Yesterday, we also suggested gold had reached a support level and could be due for a bounce back, and just that happened, with a 1.4% rise on the session.
The US session was marked by rising interest rates, with the 10-year yield achieving a 14-month high at 1.77%. Equities across the board were flat or slightly down. More notably, the Dow fell from the all-time highs reached on Monday.
The S&P is closing the session flat or slightly in the red. This comes as a result of the forced liquidation of some media stock holdings of some large funds. We also saw bank stocks like Nomura and Credit Suisse suffering. The Dow, on the other hand, closed yet again at new records, currently above 33,170. With the presumed recovery, bonds continued to be sold, keeping the 10-year yield above 1.715%. The dollar is gaining and gold is losing.
In case you missed it, Friday’s session closed on a very bullish note. Equities rose across the board while bonds were almost ignored. The S&P index gained 1.6% while the Dow had its highest close ever. It is worth noting that a large amount of block trades occurred during the weekend, suggesting that we might have surprise moves on Monday, to the upside or the downside. So far, in Asia, futures indicate a slight bullish tilt.
It’s an interesting—albeit confusing—time to look at global markets. With both positive expectations and negative factors, investors are all over the place. The dollar is rising, stocks are rising (typically, you’d expect the opposite), and bonds are being sold, nudging the 10-year yield higher. Gold is staying in place while commodities whipsaw at their own pace—the latest, with oil gaining and then retracing, or with lumber futures boldly rising.
Following on yesterday’s concerns about the economic recovery, employment data, and higher infection rates, investors sold risk en masse. Bonds didn’t gain much, and the 10-year yield just barely inched lower. The dollar mostly benefited, and as did gold.
With concerns about the global recovery and high infection rates in the US, investors sold risk-assets yesterday and cycled into bonds and cash. The 10-year yield retraced to 1.60% (still high in the current environment) and the dollar gained against its peers. Most equity indexes dropped about 1-2% and the Russell 2000 actually dropped over 3.6%.
Investors are looking at the same numbers as they were before: yields, inflation, and recovery optimism/pessimism, to then decide what kind of risk they want. Yesterday, with the 10-year yield retreating from a 14-month high, equities broke their losing streak and rose around 1% across the board.
With last week ending on a cautious note, it’s likely that this week will also be determined by investors' view on yields. Although they are elevated, this is balanced by the Fed’s accommodating stance on rates.