US market: 10-year Treasury yields are skyrocketing - will it be even higher?
13 / July / 21 Visitors: 6 ★★★★★
Market on the eve
The S&P 500 fell 0.09% to 3971 points, the NASDAQ corrected 0.60% and the Dow Jones climbed 0.30%. The increased volatility the day before was caused, on the one hand, by a margin call of a large hedge fund Archegos Capital Management, which led to a number of block trades worth more than $ 20 billion, and on the other hand, by news of the resumption of traffic in the Suez Canal. Utilities (+ 1.07%) and non-cyclical consumer goods (+ 1.03%) were among the growth leaders. Capital outflows were demonstrated by the energy and financial sectors, which consolidated by 1.26% and 0.93%, respectively.
Facebook (NASDAQ: FB: + 2.8%) and Google (NASDAQ: GOOGL) announced plans to lay submarine cables between the US and Southeast Asia;
US casino and sports betting operator Penn National Gaming (NASDAQ: PENN: -7.8%) collapses after pessimistic statements from New York politicians about the prospects for legalizing online betting in the state;
Credit Suisse (SIX: CSGN) (NYSE: CS: -11.5%) warned investors about serious losses following a margin call from Archegos Capital Management.
Today, global stock markets continue to show mixed dynamics. European stocks are trading above yesterday's levels amid the release of data on economic sentiment in the eurozone, which exceeded the expectations of market participants. At the same time, the rate of spread of COVID-19 continues to accelerate in Germany and France, which may put pressure on the growth of quotations.
Futures on American indices are also trading in different directions: the S&P 500 and Dow Jones are showing strengthening, while the Nasdaq is currently falling 0.43% due to the White House plans to raise taxes, which should bring the state more than $ 3 trillion. Investors are also awaiting news about the next package of fiscal stimulus from President Biden on Wednesday March 31, which will be aimed at developing infrastructure projects and could exceed $ 4 trillion. Market sentiment is supported by research from the Centers for Disease Control and Prevention (CDC), which shows vaccines from Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA) can provide up to 90% protection.
After a weekly rollback, the yields of 10-year Treasuries began to rise rapidly and before the opening of the trading session at the moment they showed an increase to 1.77%, having renewed the annual maximum. In the graphical presentation, an increase in yields translates into a lengthening of the curve section; thus, a steeper Treasury yield curve is formed, reflecting the acceleration in economic growth and inflation.
Asian stock markets closed mostly in the green zone. China's CSI 300 added 0.95%, Hong Kong's Hang Seng rose 0.84%, and Japan's Nikkei climbed 0.16%. The European Euro Stoxx 50 adds 0.50%.
Risk appetite is growing. The yield on the 10-year Treasury is currently strengthening to 1.77%. Futures for Brent crude oil holds above $ 64, but shows a drop of 0.46%. Gold is still declining and is currently trading at $ 1,694. Russell 2000 index futures are up 0.46% after yesterday's correction.
According to our expectations, the S&P 500 will hold the upcoming session in the range of 3945-3985 points.
Economic news and macro statistics
The monthly Consumer Confidence Index for March, which measures consumer confidence in economic activity, will be released today. Based on market expectations, the index will rise to 96.9 points against 91.3 in February.
The Freedom Finance Sentiment Index climbed to 66 out of 100. The indicator reflects the hope of market participants for a recovery in the global economy in 2021. Concerns about the negative impact of the COIVID-19 pandemic are eased by ongoing vaccinations.
Technically, the S&P 500 is still in an uptrend. The day before, the broad market index practically tested its historical maximum, however, it has not yet been able to cope with the resistance. To maintain the upward momentum, it is necessary to overcome the level of 3980 points. In this case, the next target for the “bulls” will be the psychologically significant level of 4000 points.
Leading fitness apparel maker Lululemon Athletica (NASDAQ: LULU) will report its fiscal 2020 fourth quarter results today. Investors have high hopes for this release. An update to Lululemon's forecasts in mid-January confirmed that the company's sales remained strong throughout the holiday shopping season in November and December. Market participants expect revenue of $ 1.66 billion on diluted earnings per share of $ 2.48.