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The Yield Curve Is Hitting Resistance

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What’s in Today’s Report:

  • 10s-2s Into Resistance (Chart)
  • U.S. Consumer Price Index Takeaways
  • Chart – WTI Crude Oil Hits Technical Resistance

Stock futures are attempting to stabilize this morning while global shares were mixed overnight as traders assess the latest economic data ahead of today’s unofficial start to Q1 earnings season and another important U.S. inflation print.

Economic data was negative and again pointed to stagflation overnight as Japanese Machine Orders plunged -9.8% vs. (E) -1.5% while U.K. CPI jumped to 7.0% vs. (E) 6.7%.

Today is lining up to be a very busy session from a news flow and catalyst standpoint as we kick off Q1 earnings season with reports from: JPM ($2.73), BLK ($8.92), and DAL (-$1.33) ahead of the bell. Investors will be looking for solid results to confirm the strength and resilience of corporate America.

Then we will get the March PPI report at 8:30 a.m. ET (E: 1.1%, 10.6%), but as long as the headlines are not materially hotter than expected, and the “core figures” are in line with estimates, stocks could mount a relief rally as the market has become near-term oversold.

 

In the afternoon, there is one Fed speaker: Barkin (12:30 p.m. ET) as well as a 30-Yr Treasury Bond auction at 1:00 p.m. ET. And if bond yields hold below the highs from earlier this week, that should be an additional tailwind for stocks today, especially the beaten-down tech sector.

Tom Essaye Quoted in CNBC on October 28, 2021

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10-year Treasury yield moves higher despite disappointing GDP update

The last few weeks have seen the ‘hawkish’ global central banks making a lot of noise…Tom Essaye of the Sevens Report said in a note. Click here to read the full article.

 

Why Did Stocks Drop Again?

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What’s in Today’s Report:

  • Why Are Stocks Dropping Again? (Three Reasons)
  • Chart: 10-Year Treasury Yield

Stock futures are rebounding from yesterday’s sharp losses this morning as bond yields pullback with the 10-year dipping below 1.50% overnight, easing valuation concerns.

Regarding Evergrande, the company’s stock rallied 15% overnight as the developer announced the partial sale of a regional bank stake that will result in $1.5B in cash.

Looking into today’s session there is one economic report: Pending Home Sales Index (E: 0.9%) but it should not move markets.

That will leave traders focused on a busy day of Fed chatter: Harker (9:00 a.m. ET), Powell (11:45 a.m. ET), Daly (1:00 p.m. ET), Bostic (2:00 p.m. ET), and Williams (5:00 p.m. ET).

Bottom line, the bond market has been a major driver of equity flows this week and if yields continue to pullback as they did overnight, then a rebound in the major stock indexes is likely however a retest of yesterday’s highs would result in another uptick in volatility.

Why Contracts for Difference Matter to You

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What’s in Today’s Report:

  • Why Contracts for Difference Matter to Your Clients

Stock futures are mixed as investors continue to digest the Archegos liquidation drama and look ahead to Biden’s infrastructure plans due tomorrow while yields rose overnight.

The 10 year Treasury yield rose by as much as 5 basis points overnight, reaching fresh 52-week highs which is weighing on Nasdaq futures this morning (down 0.40%).

Economic data was mostly positive overnight with Japanese Retail Sales and Eurozone Economic Sentiment both topping estimates which is supporting modest risk-on and reflationary money flows this morning.

Looking into today’s session, there are two reports on the housing market due out before the open: Case-Shiller Home Price Index (E: 1.2%) and FHFA House Price Index (E: 1.0%) and then Consumer Confidence (E: 96.4) after the bell, however none of the releases should materially move markets.

There are also a few Fed officials scheduled to speak: Quarles (9:00 a.m. ET), Bostic (12:00 p.m. ET) and Williams (2:00 p.m. ET) but they are largely expected to stick to the very dovish narrative of recent.

Today, market focus is likely to return to the bond markets given the sizeable move higher in yields overnight which is already pressuring Nasdaq futures. And if the rise in yields continues over the course of the day, expect renewed pressure on tech shares which will likely weigh on the broader stock market.