Stocks opened modestly higher this morning but quickly faded (Dow -22 pts; SPX -.2%). The Nasdaq is down .3%. Telecoms, utilities and consumer staples sectors are bouncing back from yesterday’s slide. Banks, biotechs, energy companies and retailers are a bit weaker on the day. CNBC is reporting this little rally over the past week or so is the biggest (and was accomplished on the highest trade volume) since 2009. Every trader is on pins and needles trying to figure out whether this is a head-fake or the resumption of a more durable rally for equities. The dollar is weaker today and that’s giving some commodities a boost. Gold continues upward, copper is up 1.2% and iron ore is in the green. On the other hand, WTI crude oil is down around $45.40/barrel. Bonds are up in price as yields edge lower. The 5-year and 10-year Treasury yields are hovering around 1.04% and 1.46%, respectively. The recent (all-time) lows for those securities were .94% and 1.36%, respectively. So the bump in yields has allayed (for now) concerns over the possibility of negative rates in the US. For the most part, bonds and stocks have been rallying over the last month. But with rates so low, two high-profile bond fund managers are turning cautious. Bloomberg reports Bill Gross of Janus and Jeff Gundlach of Doubleline Capital are urging investors not to buy sovereign bonds at current levels.
Import prices fell 4.8% y/y in June following a 5.0% decline in the prior month. Imports have been in deflationary mode since mid-2014 for two reasons: falling oil prices and the stronger dollar. Both of those trends have reversed a bit in 2016 and some of the pressure on prices is letting up. But we don’t expect any inflation in imported goods anytime soon. By the way, the US Bureau of Labor Statistics says import prices from China are at their lowest point since 2010. Of course, we are seeing some nascent inflationary pressure on consumer services as wage growth accelerates in the US.
We’re expecting earnings announcements from CSX Corp (CSX) and Yum! Brands (YUM) today. And then we’ll get a host of financial services companies (i.e. JP Morgan, Blackrock, Wells Fargo) later this week.