This has been a weird summer. Wall Street remains very bullish stocks despite consistent pricing pressures, a relentless streak of record highs for the S&P 500 index, which is accompanied by well over 200 trading days without a 5% pullback. US stocks were unfazed as economic growth slows, the labor market recovery struggles, and as 8-million Americans lose federal unemployment benefits.
Today, stocks had only one-way to go given the economy is passing peak everything (growth/stimulus), growing uncertainty for the economy given the expiration of benefits for many Americans, and given Treasury yields are surging. Will Wall Street have its first 5% pullback in over 211 trading days? It will be tough given traders want to buy every dip given financial conditions remain very easy.
There are still tremendous reasons to be optimistic for the US economy given 75% of US adults have received at least one COVID vaccine dose. The next couple of months could lead to a rotation back into financials, industrials, materials, and energy stocks.
The S&P 500 index is down 0.4%, while the Dow Jones Industrial Average is lower by 0.8%, with the 10-year Treasury yield higher by 4.4 basis points to 1.366%.
Treasuries/FX
The bond market did not hesitate sending Treasury yields higher as investors anticipate a Fed that will tolerate hotter inflation after a lackluster nonfarm payroll report. Rising Treasury yields will likely attract much attention later this week with the 10-year and 30-year auctions. If supply chain issues continue to send prices higher, bond yields could climb higher despite delayed expectations on when the Fed will taper its asset purchases.
The dollar is catching a strong bid here against the euro and that could get interesting on the break of the 1.18 level. The dollar is surging against the Canadian currency, up 0.75% to 1.2621. The other commodity currencies, kiwi and Aussie-dollar are down roughly half a percentage point to the greenback.
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Ed Moya
His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.
Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.
Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal.
Ed holds a BA in Economics from Rutgers University.
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