Stocks Sluggish As Bonds Offer Nearly Risk-Free Money Making

Markets churned through another day of earnings hits and misses.

Nothing really to see here as the investing community awaits the penultimate FOMC meeting of 2019, slated for October 29 and 30. Another 25 basis point reduction in the federal funds rate is expected at that time.

While cuts such as is expected in October used to be good for a good pop in stocks, lately, Wall Street has been less-than-enthusiastic when interest rates are slashed. This is clear from the current yield on the 10-year note, which refuses to budge, hovering in the 1.70-1.80 range.

That's not supposed to happen. Bond traders, however, are not being herded into low-yielding offerings at the behest of the Fed. There are certainly other ways to spread risk, into corporates or even shorter-maturity treasuries, and the bond vigilantes are taking them. There's a certain logic to taking 1.74% on a one-month bill rather than locking up money for 10 years for a yield that is only marginally higher. Having cash on hand to seize upon opportunity is smart investing.

With the yield curve so flat, there's little reason to probe the longer end, though, for safety's sake, the 30-year bond is now yielding a healthy 2.25%, nearly the best since rates were clobbered in August.

Earnings may be taking center stage for now, but the heart of the market is clearly in fixed income. Too much speculation, over-valuation, and memories of 2008 in stocks has sent money scurrying to safer places.

At the Close, Wednesday, October 23, 2019:
Dow Jones Industrial Average: 26,833.95, +45.85 (+0.17%)
NASDAQ: 8,119.79, +15.50 (+0.19%)
S&P 500: 3,004.52, +8.53 (+0.28%)
NYSE Composite: 13,114.39, +42.53 (+0.33%)