The bond market remains pretty much tethered to the 2.50 percent to 2.60 percent range that’s prevailed for the 10-year note for quite some time now, with the primary catalyst being today’s release of the Federal Reserve’s minutes from its most recent meeting. The relevant data that investors are probably paying most attention to – the jobs report last week, the JOLTS jobs survey, shows some more things that is meant to keep the Fed engaged rather than moving toward an imminent increase in rates. The quit rate – the rate at which people leave jobs for others – is still historically a bit on the low side, not at a level that would make the Fed more comfortable that the kind of labor-market dynamism needed for the Fed to shift to raising interest rates. Fact is, the central bank just isn’t there yet.
Riskiest markets saw their first hiccup in a while in the last couple of days, with a 100-point loss in the Dow Thursday that has raised a bit of concern for the first time in ages, it seems. Of course, 100-point drops in the Dow aren’t really what they used to be, but that doesn’t mean this nascent selloff should be ignored. Worldwide issues – the sudden rise in oil prices on the growing insurgency in Iraq – have investors backing away from equities and shifting a bit into safer assets like the Treasury market. The indirect bidders in Thursday’s auction of 30-year notes took the highest amount of the auction since 2006, perhaps as a way to offset worries about weak growth worldwide and the uncertainty in the Middle East.
The shift in the stock market away from momentum names and toward value is encouraging at least in some sense because it points to an ongoing appetite for equities rather than a reduction in interest there. However, one has to add the caveat that the Federal Reserve is still very much a part of this market, even as it diminishes its footprint.
There have been a few quiet days of trading lately, but today will not be one of them. Friday includes the quarterly expiration of index options and futures and single stock options and futures, and also a huge index rebalancing that will result in a lot of trading at today’s close.
Welcome Madame Chair, here’s a market selloff for you.
Fed Chair Janet Yellen made some news that she didn’t expect yesterday. She perhaps thought she was offering some clarity when she answered the question from Reuters’ Ann Saphir as to when the Fed might start raising interest rates. That’s not how it worked, although at least in this case she didn’t mouth off to Maria Bartiromo the way Ben Bernanke did eight years ago.
The ructions in China have had an interesting effect on commodities prices – good for gold, crappy for copper. And more developments in this area should be expected as the market deals with growing weakness and the threat of a deflating credit bubble coming from the massive lending to various sectors in the world’s second-largest economy. Copper has been rather weak of late, but the broader CRB commodities index is actually much higher on the year. This is the biggest divergence since the eurozone debt crisis in 2011, points out Ashraf Laidi, the chief global strategist at City Index in London.