When looking at how equity markets respond to news we usually consider what does the news mean for liquidity (stocks like falling interest rates) and the economy (stocks like a positive environment for corporate earnings). Coming out of Friday’s very strong US Nonfarm Payrolls report, traders focus was that it was good for the economy and sent equities higher.
There appears to have been a re-evaulation over the weekend with traders recognizing that strong employment reduces the chances of multiple large interest rate cuts from the Fed. Treasury yields are on the rise, with the 10-year climbing back up above 4.00% for the first time since August. The prospect that interest rates may not fall as fast as previously thought has thrown a bucket of cold water on the market rally. US index futures are down 0.4%-0.5% this morning. Over in Europe, the Dax is down 0.2% while the FTSE is up 0.4%, likely getting a boost from the Energy Sector.
Today is the first anniversary of the Hamas attack on Israel. With investors clearly concerned about an escalation in the conflict, US Crude Oil is up 1.8% this morning, while Gold is up 0.25%. In contrast, Copper is down 0.25%.
This week starts off slow for business news but picks up later in the week. On Wednesday, the Reserve Bank of New Zealand is widely expected to but its overnight rate by 0.50%. Thursday and Friday bring US Consumer and Producer Price reports. Earnings season also kicks off at the end of this week with JPMorgan Chase* and Wells Fargo reporting results on Friday.
*Shares of JPMorgan Chase are held in portfolios managed by SIA Wealth Management.