Market Snapshot October 10, 2018

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Good Morning on this Fantastic Wednesday,

 

PPI and Wholesale inventories data out today. Both for the most part in line. Bonds were selling off overnight and into the open, but seem to have clawed their way back to even on a selloff in equities. The Dow is down 375 and I can see this picking up steam into the afternoon. Are stocks starting to roll over? Maybe so, and the IMF report that equities in the US are overvalued is not helping. That will/should move some money back into bonds. CPI is out tomorrow and is more important to the markets than today’s PPI (I don’t really agree with that philosophy, as PPI is an early stage metric but what do I know?). Anyway, if CPI comes in weak or tame tomorrow, we could see some improvement in bonds. We do also have a 10-yr auction in about 10 mins so that could make today a bit more interesting. Still need to be playing defense and to that point, Matt Graham had a few good sentences on the subject (don’t take my word(s), take his:

 

I want to say (and believe) that this leg of the journey is mostly over and that it would take another round of stronger data to push rates much higher.  A lot of people are saying that, and I don’t take too much exception to the idea. But the one thing I’m not seeing is the rationale for a swift move back toward lower rates.  Such a move requires clearly-delineated motivation.  We’ll know it when we see it, and we haven’t seen it yet.  For now, that means we have to keep playing defense against the possibility that rates continue higher, and simply cross our fingers that 3.25%-ish is going to shape up as a ceiling.

 

Make today great!