Stocks hover near record highs, 10-year Treasury yield breaks 1.50%, meme trading continues, no surprises from BOC, bitcoin bounces

US stocks continue to hover near record highs as investors pile back into Treasuries.  The bond market is convinced inflation will be transitory and that the Fed won’t budge this year over its asset purchases.  Tomorrow’s inflation data won’t change the Fed’s mind over inflation, but a hot reading could help put a tentative floor on Treasury yields.  The 10-year Treasury yield is 4.4 basis points lower at 1.489%, extending declines after investors showed robust demand for the 10-year Treasury auction.  If purchasing Treasuries remains the theme of Wall Street, the 10-year yield does not have much support until 1.40%.

Meme craze continues

The next round of meme stocks is creating a buzz as retail traders show no signs of giving up on this trading craze.  The WallStreetBets crowd is now backing ContextLogic, Clean Energy Fuels, Clover Health Investment, and GEO group.  This latest chapter of meme stock mania seems very much to be the typical pump and dump trade.  GameStop rallied ahead of earnings, while AMC continues to come back to earth.

This retail trading frenzy continues and will likely remain a viable option for some traders if the S&P 500 index provides lackluster moves and continues to hover around record highs.

BOC

The Bank of Canada policy decision delivered no surprises.  The Bank has left the door open to taper next month and has not raised any flags over the strength with the Canadian dollar.  If the Canadian economy continues to strengthen and recover from a difficult third wave of the virus, policymakers will have an easy decision to reduce its weekly bond buying next month.

Commodities

Commodities are mixed – silver, aluminum, and corn rally while crude, copper, wheat, soybeans, and platinum slide.  The most important move on Wall Street was the continued pressure with Treasury yields, both real and nominal.  The reflation trade is not happening as many expected and this has taken the air out of the super commodity cycle trade.

Bitcoin

Bitcoin got its groove back after crypto traders embraced the historic moment of when El Salvador became the first nation to officially adopt a cryptocurrency.  It was a lot easier for bitcoin bulls to defend the USD30,000 level now that investors anticipate more developing nations to adopt bitcoin as legal tender.

Mass adoption in the developing world seems likely and that should keep some underlying support for bitcoin.  More countries in Latin America will follow suit, where there is lack of financial service access and people want to get out of their local currencies that are getting debased or inflated out of existence.

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