Not all wining streaks are meant to last. Just ask the 2007 New England Patriots. Some winning streaks when they end, however, hurt more than others. Just ask the 2007 New England Patriots.
The winning streak the market had been on (eight sessions for the S&P 500 and nine sessions for the Nasdaq) came to an end yesterday, but it didn’t really hurt all that much. The S&P 500 declined 0.8% and the Nasdaq declined 0.9% — reasonable and tidy pullbacks given that they had gone up as much as 6.7% and 8.8%, respectively, during the course of their winning streaks.
A lousy 30-yr bond auction and Fed Chair Powell saying the Fed won’t hesitate to raise rates again if it needed to were the reported catalysts for the loss. Treasury yields moved higher in their wake, and as Treasury yields moved higher, stock prices headed lower.
There has been some regrouping this morning, however.
The 10-yr note yield is down six basis points to 4.57%, and it seems that traders might be allowing themselves to accept that yesterday’s bond auction, which saw the lowest demand since 2016, might not have been as bad as advertised.
That’s because subsequent reports have indicated that the U.S. financial services division of China’s Industrial and Commercial Bank was hit by a ransomware cyberattack yesterday that disrupted trades in the Treasury market. Accordingly, there has been some allowance for the possibility that this issue contributed to the weak auction.
It’s unlikely that was the only issue; nonetheless, an awareness of the issue has reduced some of the demand angst that followed that auction. Strikingly, the 30-yr bond yield, which was at 4.72% just before the auction results and jumped to 4.82% after their release, is at 4.70% this morning.
The recovery in yields today has been a key source of support for the equity futures market along with a seeming desire to hold the technical line at the 50-day moving average for the S&P 500 (4,336) and Nasdaq Composite (13,395).
Currently, the S&P 500 futures are up 19 points and are trading 0.4% above fair value, the Nasdaq 100 futures are up 60 points and are trading 0.4% above fair value, and the Dow Jones Industrial Average futures are up 137 points and are trading 0.4% above fair value.
These indications put the major indices on track for a higher open or a buy-the-dip trade that has been a popular trade in November.
There isn’t any corporate news that is moving the needle today, even though there has been plenty of corporate earnings news since yesterday’s close. The economic calendar is also on the light side today, featuring the preliminary University of Michigan Index of Consumer Sentiment at 10:00 a.m. ET.
Aside from the overall sentiment reading, market participants will be paying close attention to consumers’ inflation expectations, which could be a market mover.
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Originally Posted November 10, 2023 – Regrouping after win streak comes to an end
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