What was up on Monday was down on Tuesday, and what was down on Monday was up on Tuesday. That generalization applies to Treasuries, too.
The broader point is that the broader stock market remains resilient to selling interest. That doesn’t mean it is shooting higher, only that it isn’t selling off in a material fashion and that there is still an inclination to buy into weakness.
The equal-weighted S&P 500 is down just 0.1% year-to-date. We’ll call that churning action; meanwhile, the market-cap weighted S&P 500 is up 3.9% year-to-date. We’ll call that mostly mega-cap action.
The Russell 2000, as we noted yesterday, has been a weak spot. It is down 3.6% year-to-date. It would be remiss not to mention that the Russell 2000 soared 26.6% between its October 27 low and its December 28 high, so the jury is still out on whether this is some normal consolidation after a huge run in a short amount of time or an early warning sign that the economic path ahead is going to get bumpy.
Recent employment and ISM data favor the consolidation argument, but of course time will provide a clearer picture.
The picture at the moment is that the the major indices are on track for a higher start on this Hump Day.
Currently, the S&P 500 futures are up 16 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 81 points and are trading 0.5% above fair value, and the Dow Jones Industrial Average futures are up 61 points and are trading 0.2% above fair value.
Modest gains in most mega-cap stocks have provided the foundation for the positive disposition along with better-than-expected earnings results from Ford (F) and Chipotle Mexican Grill (CMG) that have provided a nice distraction from the 30% fallout in Snap (SNAP) after its earnings report and disappointing Q1 adjusted EBITDA outlook.
CVS Health (CVS) is up 0.9% in pre-market action even though it provided disappointing FY24 EPS guidance that was attributed to higher medical costs.
In other developments, the trade deficit widened to $62.2 billion in December (Briefing.com consensus -$62.0 billion) from an upwardly revised $61.9 billion (from -$63.2 billion) in November. Exports were $3.9 billion more than November exports and imports were $4.2 billion more than November imports.
The key takeaway from the report is that exports and imports both increased in a welcome sign for global trade.
This news didn’t make much difference to the Treasury market. The 2-yr note yield is up two basis points to 4.42% and the 10-yr note yield is up two basis points to 4.11%, little changed form where they were just ahead of the report.
There is a $42 billion 10-yr note auction at 1:00 p.m. ET that could prove to be a market mover based on whether demand for that auction is weak or strong. Yesterday’s 3-yr note auction was met with strong demand and provided a recovery catalyst for Treasuries, which had been under pressure since the release of the January employment report last Friday.
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Originally Posted February 7, 2024 – Resilient market poised to move higher
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