What Happened Last Week?
Stocks Decline in Slowest Trading Day of This Year
Stocks dropped in the slowest trading day of 2021 after a rally that drove the equity market to all-time highs. Treasuries climbed. Volume on U.S. exchanges slipped below 10 billion shares for the first time this year.
“Stocks’ momentum is strong, no doubt about that,” said Lindsey Bell, chief investment strategist at Ally Invest. “But the market may be ready to take a breather as investors digest all the good news, determine how much of that is priced in and weigh it against uncertain risks like inflation.”
On the economic front, data showed U.S. job openings rose to a two-year high in February, led by gains in some of the industries hardest hit during the pandemic. The International Monetary Fund upgraded its global growth forecast for the second time in three months, while warning about a divergence between advanced and lesser-developed nations.
(Source: bloomberg.com 4/5/21)
What’s on the Agenda for this Week?
The three areas that have the greatest ability to impact backend pricing this week are: (1) Domestic Flavor, (2) The Talking Feds and (3) Treasury Dump.
(1) Domestic Flavor: The two major focus points this week will be Tuesday’s CPI which after last week’s huge surge in PPI will be closely monitored for inflation both on a MOM and a YOY basis. Next up is Thursday’s Retail Sales report which after the prior’s months negative reading is also expected to surge as this period does not have the bad weather as the prior period and has the impact of the $1,400 per person checks as well as reopenings of some parts of our economy. The high-frequency Initial Weekly Jobless Claims data will be largely ignored due to spring break and other seasonality factors.
(2) The Talking Fed: There will be more soothing-dovish tones from Fed Chair Powell this week, who seemingly pops his head up each week to offset the strong economic data and spread his “transitory” message and dovish cheer. Several other prominent Feds will also speak this week. Here is this week’s schedule:
04/12: Eric Rosengren
04/13: Esther George, Mary Daly and Raphael Bostic
04/14: Fed Chair Powell, John Williams, Robert Kaplan, Fed’s Beige Book
04/15: Loretta Mester
(3) Treasury Dump: This is a huge week for dumping debt into the marketplace. How well it is received will have an impact on the yield curve.
04/12: $58B 3 year note, $38B 10Y note
04/13: $24B 30 year Bond.
Treasury Dump: There were two note auctions today.
3 year note: $58B went off at a high yield of 0.376% with a bid-to-cover ratio of 2.32
10 year note: $38B went off at a high yield of 1.680%, with moderate demand with a bid-to-cover ratio of 2.36
On Deck for Tomorrow: Monthly Bond Coupon Rollover, Consumer Price Index, 30 year Treasury Bond Auction.
The Talking Fed
St. Louis Fed President James Bullard said that once the U.S. got to a 75% vaccination rate (which could be within the next 2 to 3 months), that it would allow a “taper debate”, although that does not mean a change in Fed policy.