Stocks are little changed in early trading (Dow +17 pts; SPX +.3%). The energy sector is rebounding as oil heads higher. Telecoms and healthcare are lagging a bit. WTI crude oil is up 3% to $37.70/barrel. Brent crude is up to nearly $41/barrel. The dollar is unchanged at the moment and commodities are mostly higher. Iron ore and copper are up over 1%. Bonds are modestly lower. The 5- and 10-year Treasury yields are up to 1.37% and 1.86%, respectively. The 2-year Treasury yield has seen huge volatility over the past few months on rapidly changing expectations for Fed interest rate hikes. It started out the year over 1% and quickly fell to .65%. But since the stock market bottomed on Feb. 11th, the 2-year yield has recovered to .89%. Speaking of interest rates, the average 30-year fixed mortgage is down to about 3.7%. So it’s not surprising that refinancing accounted for about 57% of total mortgage applications last week.
Jim Paulsen of Wells Capital Management called the bottom of this correction back on Feb. 11. At the time, he said it was based on fear of a recession which would not come. Since then, he’s noted improved economic data is providing a lift to financial markets. The Business Insider quotes him as saying, “If you were pricing this thing for a recession, you’ve got to take it back out.” He believes the SPX could now re-test its high from May 2015. Separately, former GE CEO Jack Welch said in a CNBC interview today that “things are looking up” for business activity. He sees strength in autos, housing, and employment. “There’s clearly a pocket of change, particularly in the last couple of weeks in February and the first couple of weeks in March.”
Expect short-term traders to push the market around in advance of the European Central Bank’s (ECB) monetary policy meeting tomorrow. But those who have a holding period longer than one week are more focused on improving economic data. The Citigroup Economic Surprise Index has surged from -55 to -13 over the last month.