WEEKEND WRAP: Stocks Bounce Badly, Bonds Rally In Charged Political, Economic Environment

Stocks ripped higher on Friday after September non-farm payrolls missed estimates, stoking expectations of another 25 basis point rate cut by the FOMC in their upcoming, October 29-30, meeting.

All US indices posted gains over one percent, offsetting about half of the losses made during Tuesday and Wednesday sessions. Despite the huge Friday gains, three of the four major indices finished in the red for a third straight weekly decline as fears of an upcoming recession, continued parlor games in Washington fueling fears of an impeachment of President Trump, and ongoing fits and starts in trade negotiations with China outweighed monetary politics and policy direction.

The NASDAQ was the lone survivor, with a gain of just over 1/2 percent.

Jittery as it has been, US equity markets continue to show signs of weakness but not of breaking down in a capitulating move. With third quarter earnings about a week away, there's optimism that corporate America still has not lost its profitable manner, meanwhile, the flight to US treasuries and corporate bonds continued apace throughout the week, with the yield on the 10-year note dropping 17 basis points - from 1.69 to 1.52% - for the week, and losing 38 basis points since the recent bond selloff sent to 10-year yield to a high of 1.90 on September 13.

Friday's closing bond price for the benchmark 10-year is nearing the lows made in late August and early September of 1.47%.

There seems to be little standing in the way of the 10-year note heading below its historic low yield made on July 5, 2016, of 1.37%, as comparable notes in developed nations - Germany, Japan, Switzerland - are all offering negative yields.

How long the treasury complex can withstand the onslaught of buying worldwide is a minor concern since the Fed has already signaled to markets that they were willing and able to offer negative yields, like the rest of the world's developed nations.

The specter of negative yielding bonds looms closer in the US, but is probably at least two years away, if it develops at all. A recession, such as has been predicted for 2020 (and also was predicted for 2019), could push the 10-year below one percent, but it's a long way down to zero for the world's most popular bond and the world's largest economy.

Unless Democrats succeed in unseating President Trump through impeachment or other means, the onus of recession remains, though it could very well be short-lived, since the US has plenty of untapped capital and productivity.

For the present time, it would be prudent to keep a close eye on the impeachment fiasco underway in congress. There's a strong likelihood that push-back by the Trump administration could send the entire bag of nonsense and dubious Democrat claims into the courts, pushing the narrative through the Democrat primaries in Spring 2020 all the way to November's presidential and congressional elections.

That actually could be the plan for Democrats, since they have made some very spurious allegations about the president, but, the mainstream media loves a circus and promotes the impeachment mantra in an unalterable, monotonous, fallacious chorus.

The American public has grown tired of the repeated attempts to besmirch the duly elected chief executive and the result could be an historic landslide victory for Republicans in the fall of 2020. The alternative, should the Democrats and their obedient lackeys in the media succeed is more than likely to cause a rift in the populace - generally between urban liberals and rural conservatives - that could foment tremendous civil unrest and lawlessness. That is the disruption Wall Street - and most of the civilized world - fears most.

Bumpy will be the ride for the economy, politics, and society over then next 12 to 16 months unless the Democrats are exposed and soundly defeated.

At the Close, Friday, October 4, 2019:
Dow Jones Industrial Average: 26,573.72, +372.68 (+1.42%)
NASDAQ: 7,982.47, +110.21 (+1.40%)
S&P 500 2,952.01, +41.38 (+1.42%)
NYSE Composite: 12,831.54, +145.78 (+1.15%)

For the Week:
Dow: -246.53 (-0.92%)
NASDAQ: +42.85 (+0.54%)
S&P 500: -9.78 (-0.33%)
NYSE Composite: -140.43 (-1.08%)