Is There an Opportunity in Defensive Sectors?
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What’s in Today’s Report:
- Why Have Defensive Sectors Traded So Poorly and Is There an Opportunity There?
- Chart: 10-Yr Treasury Note Futures Imply Potential Reversal Lower in Benchmark Yields
U.S. stock futures are tracking global equity markets higher this morning. As investors welcome a sizeable drop in bond yields and new stimulus plans by China.
Bloomberg reported overnight that China may issue 1T yuan in debt to be used for infrastructure projects in order to help the economy meet the government’s annual growth targets. The news is alleviating some lingering concerns about the health of the world’s second-largest economy.
There are no economic reports today which will leave the market focused on more Fed speakers: Bostic, Waller, Kashkari, and Daly, and the subsequent reaction from bond markets.
Additionally, the Treasury will hold auctions for 3 and 6-month Bills at 11:30 a.m. ET and 3-Yr Notes at 1:00 p.m. ET that could impact yields.
Bottom line, the rise in Treasury futures (implying lower yields) yesterday when bond markets were closed for Columbus Day was a major factor supporting the rally in stocks, and how yields move today as fixed income markets open for the week will likely dictate the price action in stocks.
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