Michael M. Santiago
The major market averages closed out Monday’s trading session to the downside as the indices hovered in a tight range for most of the day. Treasury yields on the other hand caught a bid higher.
The blue-chip Dow (DJI) closed out Monday lower by 0.2%, the benchmark S&P 500 (SP500) ended in the red by 0.1%, and the tech-focused Nasdaq Composite (COMP:IND) finished lower by 0.4%.
On a sector-by-sector stance, investors watched seven of the 11 S&P segments conclude trading to the topside and were led by the Utilities space. On the other side of the spectrum, the two worst performing areas on the day were the Communication Services and Consumer Discretionary segments.
Furthermore, with the first two months of 2024 trading year now in the rearview mirror, investors will see that 312 of the S&P 500 names are currently trading in positive territory.
Looking towards the Treasury market and yields were able to push higher with the shorter end U.S. 2 Year Treasury yield (US2Y) advancing by 7 basis points to 4.60%. At the same time the longer end U.S. 10 Year Treasury yield (US10Y) moved up by 3 basis point to 4.21%.
See how other yields trade across the entire yield curve here.
“With stocks sitting at, bitcoin racing towards, and gold hitting new all-time highs in today’s session, financial conditions appear to be very easy going into Fed Chair Powell’s testimony to Congress later this week. While a resilient Q4 earnings season has enabled equities to build on last year’s rally, the bond markets have repriced significantly since the turn of the year, with long-duration rates moving back up sharply in early 2024,” Seeking Alpha analyst Ahan Vashi stated.
“We’re currently on a run that you may not see again in your lifetimes,” Deutsche Bank’s Jim Reid said. “The S&P 500 last week completed a run of 16 positive weeks out of the last 18 for first time since 1971. If this carries on for another week it’ll be 17 out of 19 for the first time since 1964. A remarkable and relentless period of performance.” (See the biggest contributors and detractors to the S&P’s run year to date.)
“It’s a quiet start to a busy week,” UBS’ Paul Donovan said. “The ECB makes a policy decision later this week – no one is expecting a change, but it allows for an official statement and ECB President Lagarde will speak. While Lagarde speaking might lack a certain scarcity value, the tone of recent comments from ECB members has tended towards rate cuts being later.”
“Federal Reserve Chairman Powell testifies to Congress later in the week. Recent Fed speakers have tended to suggest a slower pace of rate cuts than was the case with rate increases. This is logical – rate increases were taking policy from an emergency setting to neutral, and then overtightened. Rate cuts are designed to keep real interest rates more or less stable.”
Powell “will likely stick to the January FOMC script but the markets always seem to get something new out of these appearances which include a lot of congressional Q&A,” Reid said. “He may receive plenty of questions about the balance sheet.”
