Stocks. More noise.
And it will remain that way as long as the 2-year and 10-year notes remain inverted.
On Tuesday, the 2-year was yielding 1.53, the 10-year, 1.49.
On Wednesday, the 2-year was at 1.50, the 10-year, 1.47.
Gold and silver continue to outperform stocks by enormous margins. Spot silver closed the day in the US at $18.315 per ounce. Gold spot was $1538.70.
Keep a close watch on your 401K. It could vanish at a moment's notice. While that is not probable, the chances for it losing price are very good.
The global financial system is on the verge of complete collapse. Some say it has been since 2008. There is unlikely to be a bell rung when it all falls apart, but a steady, slow, wrenching decline is in the cards now that the marginal utility of a dollar is less than one.
The central bankers know this. Politicians know this. It's best to be informed.
At the Close, Wednesday, August 28, 2019:
Dow Jones Industrial Average: 26,036.10, +258.20 (+1.00%)
NASDAQ: 7,856.88, +29.94 (+0.38%)
S&P 500: 2,887.94, +18.78 (+0.65%)
NYSE Composite: 12,559.23, +85.18 (+0.68%)
Showing posts with label 2-year note. Show all posts
Showing posts with label 2-year note. Show all posts
Wednesday, August 28, 2019
Wednesday, August 14, 2019
Stocks Rally On Trump Tariff Turnback; PMs Slammed, Bonds Not Buying It As Curve Inverts
Tuesday's miraculous stock market rally was fueled by the silliest of news.
The US Trade Representative (USTR), led by Robert E. Lighthizer, announced the delay of some of the proposed tariffs to be imposed upon China come September 1, rolling back the date on some consumer-sensitive items to December 15.
The government also mentioned that trade reps from both countries would speak by phone in the near future.
Thus, stocks were off to the races, having been given a big, fat one to knock out of the park.
Obviously, such news only makes for one-day wonders on Wall Street and an opportunity to smack down real money - gold and silver - in the process. Precious metals had extended their rallies and were soaring overnight. Traders in the futures complex felt best to sell, all at once, apparently.
Meanwhile, short-dated treasuries were being whipsawed, with the yield on the 2-year note rising from 1.58% to 1.66%, while the 10-year note gained a smaller amount, the yield rising from 1.65% to 1.68%.
Overnight, as Tuesday turned to Wednesday in the US, the two-year yield briefly surpassed that of the 10-year by one basis point. This marks the first time the 2s-10s have inverted since 2005. Because such an inversion almost always indicates imminent recession, this spurred headlines across the financial media, with Yahoo Finance screaming in all caps, YIELD CURVE INVERTS.
One shouldn't get too excited about this startling, yet widely-anticipated event. Each of the last seven recessions (dating back to 1969) were preceded by the 10-year falling below the 2-year, but in the most recent instance - December 27, 2005 - the recession didn't actually get underway until the third quarter of 2007, as precursor of the Great Financial Crisis (GFC). The last time there was an inverted 2s-10s yield curve was May 2007.
Naturally, haters of President Donald J. Trump are enthusiastically cheering for a recession prior to the 2020 elections, and they may get their wish. Stocks have been running on fumes for about 18 months, a bear market indicated by Dow Theory as far back as April 9, 2018.
The onset of recession, after the first instance of the 2s-10s inversion, normally occurs eight to 24 months hence.
With the hopes of Democrats taking back the White House riding on anything from Russian election interference to trade wars with China to recession, the leftists are pushing on various strings, hoping for something - anything - to trip up the celebrity president.
They have a 15-month lead time on recession, so their chances are about 50/50. If the recession occurs after the election, which Donald J. Trump will almost surely win, they may conclude that having a recession in ones' second term is an impeachable offense.
This story is developing, so watch something else.
[sarcasm noted]
The US Trade Representative (USTR), led by Robert E. Lighthizer, announced the delay of some of the proposed tariffs to be imposed upon China come September 1, rolling back the date on some consumer-sensitive items to December 15.
The government also mentioned that trade reps from both countries would speak by phone in the near future.
Thus, stocks were off to the races, having been given a big, fat one to knock out of the park.
Obviously, such news only makes for one-day wonders on Wall Street and an opportunity to smack down real money - gold and silver - in the process. Precious metals had extended their rallies and were soaring overnight. Traders in the futures complex felt best to sell, all at once, apparently.
Meanwhile, short-dated treasuries were being whipsawed, with the yield on the 2-year note rising from 1.58% to 1.66%, while the 10-year note gained a smaller amount, the yield rising from 1.65% to 1.68%.
Overnight, as Tuesday turned to Wednesday in the US, the two-year yield briefly surpassed that of the 10-year by one basis point. This marks the first time the 2s-10s have inverted since 2005. Because such an inversion almost always indicates imminent recession, this spurred headlines across the financial media, with Yahoo Finance screaming in all caps, YIELD CURVE INVERTS.
One shouldn't get too excited about this startling, yet widely-anticipated event. Each of the last seven recessions (dating back to 1969) were preceded by the 10-year falling below the 2-year, but in the most recent instance - December 27, 2005 - the recession didn't actually get underway until the third quarter of 2007, as precursor of the Great Financial Crisis (GFC). The last time there was an inverted 2s-10s yield curve was May 2007.
Naturally, haters of President Donald J. Trump are enthusiastically cheering for a recession prior to the 2020 elections, and they may get their wish. Stocks have been running on fumes for about 18 months, a bear market indicated by Dow Theory as far back as April 9, 2018.
The onset of recession, after the first instance of the 2s-10s inversion, normally occurs eight to 24 months hence.
With the hopes of Democrats taking back the White House riding on anything from Russian election interference to trade wars with China to recession, the leftists are pushing on various strings, hoping for something - anything - to trip up the celebrity president.
They have a 15-month lead time on recession, so their chances are about 50/50. If the recession occurs after the election, which Donald J. Trump will almost surely win, they may conclude that having a recession in ones' second term is an impeachable offense.
This story is developing, so watch something else.
[sarcasm noted]
Sunday, January 13, 2019
Weekend Wrap: The Fed Never Had Control, And What They Now Have Is As Fake As Fake News
What a week it was for equity holders and speculators!
Friday's very minor declines snapped five-day winning streaks for the major indices, with the exception of the NYSE Composite, which continued gaining for a sixth straight session.
Solid for the past three weeks, the current rally has managed to relieve the stress from steep losses incurred in December though the majors still have plenty of distance to travel. For instance, the Dow Jones Industrial Average lost 4034.23 from December 4 through Christmas Eve (Dec. 24), and has since gained 2203.75, nearly half of that amount regained the day after Christmas (Dec. 26), setting a one-day record by picking up 1086.25 points.
The other indices have exhibited similar patterns, with sudden acceleration in the final trading days of December and continuing smaller, albeit significant, positive closes on nine of the twelve sessions from December 26 through January 11.
Catalysts for the post-holiday rally continue to be diverse, the most significant strong data point coming from the BLS, which showed the economy adding 312,000 jobs for December in the most recent non-farm payroll report, released last Friday. So far beyond expectations was that number that it appeared to have kept sentiment positive for a full week after its release.
The week's most important data release was Friday's CPI number, which - thanks largely to the price of gasoline - declined 0.1% in December, and slowed to 1.9% in year-over-year measure. Core was +0.2% (mom) and +2.2% (yoy).
Slowing inflation, or perhaps, outright deflation, is anathema to the Federal Reserve, despite their all-too-frequent suggestions that they exist to keep inflation under check. The entire monetary scheme of the Fed and the global economy would disintegrate without inflation, thus the Fed will be diligent in regards to interest rates going forward. After hiking the federal funds rate at a pace of 25 basis points per quarter for the past two years, the Fed has received warnings aplenty, first from the cascading declines in the stock market, and second, from a squashing of inflation.
That CPI data, for all intents and purposes, killed any idea of a March rate hike, just as the market drop caused Treasury Secretary Mnuchin to frantically call in the Plunge Protection Team just before Christmas. The results from that plea for help have been grossly evident the past three weeks.
While the Fed believes it can control the economy, the truth is that it absolutely cannot. Bond prices and yields point that out in spades. The benchmark 10-year note yield dropped as low as 2.54% (1/3) in the face of all the recent rate hikes. As of Friday, the 2s-10s spread fell to 16 basis points. Already inverted are the 1-year and 2-year notes as related to the 5s. The 1-year closed on Friday with a yield of 2.58%; the 2-year at 2.55%; the 5-year at 2.52%, the 7-year at 2.60, and the 10-year at 2.60%.
The 2s-10s spread is the most cited and closely watched, but the 1s-7s are just two basis points from inversion, the cause, undeniably, the Fed's incessant pimping of the overnight rate.
If bond traders are acting in such a manner that they prefer short-dated maturities over the longer run, the signal is danger just ahead. Talk of an impending recession has tapered off in recent days, but the bond market's insistent buying patterns suggest that the Fed did indeed go too far, too fast with the rate hikes, spurring disinvestment and eventually, a recession.
What the Fed cannot control are human decisions. Noting the sentiment in bonds, the latest stock market gains have been contrived from the start and are certain to reverse course. As has been stated here countless times, bull markets do not last forever and Dow Theory has already signaled primary trend change twice in 2018 (in March-April and October).
The major indices have not escaped correction territory and all are trading below both their 50-and-200-day moving averages. Further those averages are upside-down, with the 200-day below the 50-day. The death crosses having already occurred, stocks will resume their reversion to the mean in the very near future.
Dow Jones Industrial Average January Scorecard:
At the Close, Friday, January 11, 2019:
Dow Jones Industrial Average: 23,995.95, -5.97 (-0.02%)
NASDAQ: 6,971.48, -14.59 (-0.21%)
S&P 500: 2,596.26, -0.38 (-0.01%)
NYSE Composite: 11,848.01, +8.70 (+0.07%)
For the Week:
Dow: +562.79 (+2.40%)
NASDAQ: +232.62 (+3.45%)
S&P 500: +64.32 (+2.54%)
NYSE Composite: +314.67 (+2.73%)
Friday's very minor declines snapped five-day winning streaks for the major indices, with the exception of the NYSE Composite, which continued gaining for a sixth straight session.
Solid for the past three weeks, the current rally has managed to relieve the stress from steep losses incurred in December though the majors still have plenty of distance to travel. For instance, the Dow Jones Industrial Average lost 4034.23 from December 4 through Christmas Eve (Dec. 24), and has since gained 2203.75, nearly half of that amount regained the day after Christmas (Dec. 26), setting a one-day record by picking up 1086.25 points.
The other indices have exhibited similar patterns, with sudden acceleration in the final trading days of December and continuing smaller, albeit significant, positive closes on nine of the twelve sessions from December 26 through January 11.
Catalysts for the post-holiday rally continue to be diverse, the most significant strong data point coming from the BLS, which showed the economy adding 312,000 jobs for December in the most recent non-farm payroll report, released last Friday. So far beyond expectations was that number that it appeared to have kept sentiment positive for a full week after its release.
The week's most important data release was Friday's CPI number, which - thanks largely to the price of gasoline - declined 0.1% in December, and slowed to 1.9% in year-over-year measure. Core was +0.2% (mom) and +2.2% (yoy).
Slowing inflation, or perhaps, outright deflation, is anathema to the Federal Reserve, despite their all-too-frequent suggestions that they exist to keep inflation under check. The entire monetary scheme of the Fed and the global economy would disintegrate without inflation, thus the Fed will be diligent in regards to interest rates going forward. After hiking the federal funds rate at a pace of 25 basis points per quarter for the past two years, the Fed has received warnings aplenty, first from the cascading declines in the stock market, and second, from a squashing of inflation.
That CPI data, for all intents and purposes, killed any idea of a March rate hike, just as the market drop caused Treasury Secretary Mnuchin to frantically call in the Plunge Protection Team just before Christmas. The results from that plea for help have been grossly evident the past three weeks.
While the Fed believes it can control the economy, the truth is that it absolutely cannot. Bond prices and yields point that out in spades. The benchmark 10-year note yield dropped as low as 2.54% (1/3) in the face of all the recent rate hikes. As of Friday, the 2s-10s spread fell to 16 basis points. Already inverted are the 1-year and 2-year notes as related to the 5s. The 1-year closed on Friday with a yield of 2.58%; the 2-year at 2.55%; the 5-year at 2.52%, the 7-year at 2.60, and the 10-year at 2.60%.
The 2s-10s spread is the most cited and closely watched, but the 1s-7s are just two basis points from inversion, the cause, undeniably, the Fed's incessant pimping of the overnight rate.
If bond traders are acting in such a manner that they prefer short-dated maturities over the longer run, the signal is danger just ahead. Talk of an impending recession has tapered off in recent days, but the bond market's insistent buying patterns suggest that the Fed did indeed go too far, too fast with the rate hikes, spurring disinvestment and eventually, a recession.
What the Fed cannot control are human decisions. Noting the sentiment in bonds, the latest stock market gains have been contrived from the start and are certain to reverse course. As has been stated here countless times, bull markets do not last forever and Dow Theory has already signaled primary trend change twice in 2018 (in March-April and October).
The major indices have not escaped correction territory and all are trading below both their 50-and-200-day moving averages. Further those averages are upside-down, with the 200-day below the 50-day. The death crosses having already occurred, stocks will resume their reversion to the mean in the very near future.
Dow Jones Industrial Average January Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 1/2/19 | 23,346.24 | +18.78 | +18.78 |
| 1/3/19 | 22,686.22 | -660.02 | -641.24 |
| 1/4/19 | 23,433.16 | +746.94 | +105.70 |
| 1/7/19 | 23,531.35 | +98.19 | +203.89 |
| 1/8/19 | 23,787.45 | +256.10 | +459.99 |
| 1/9/19 | 23,879.12 | +91.67 | +551.66 |
| 1/10/19 | 24,001.92 | +122.80 | +674.46 |
| 1/11/19 | 23,995.95 | -5.97 | +669.49 |
At the Close, Friday, January 11, 2019:
Dow Jones Industrial Average: 23,995.95, -5.97 (-0.02%)
NASDAQ: 6,971.48, -14.59 (-0.21%)
S&P 500: 2,596.26, -0.38 (-0.01%)
NYSE Composite: 11,848.01, +8.70 (+0.07%)
For the Week:
Dow: +562.79 (+2.40%)
NASDAQ: +232.62 (+3.45%)
S&P 500: +64.32 (+2.54%)
NYSE Composite: +314.67 (+2.73%)
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