William Sullivan
William Sullivan
bonds buy close data dominant environment improvement market sees sell stock view
The stock market sees these data as representing an end to the recessionary environment and signaling some improvement in the not-too-distant future. For now, the dominant view is that this is the close on the 2001 recession, so you sell bonds to buy stocks.
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There's no doubt the market is on the defensive and is preparing for what appears to be inevitable. A rate hike at the August policy meeting later this month.
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I think right now the stock market is very comfortable with the benchmark 30-year-bond trading at between 6.5 and 7 percent. But if we start moving that range up to 7.25 and above, that could really be a major speed bump in the way of the stock market.
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Today the collective wisdom is that the economy will improve in the not-too-distant future, and that's hostile for bonds because it suggests that the Fed is done easing monetary policy and that financial markets may confront some interest-rate pressures as the economy improves and borrowing re-accelerates.
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If we do see additional absorption of spare labor market capacity, that could mean more rate hikes through the summer.
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Ford postponing the event would be their judgment that market conditions are becoming disorderly. (Ford is) betting that conditions will improve once upcoming uncertainties are out of the way, one of which is the FOMC meeting.
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There were questions developing in the market late last week regarding the tenor of Greenspan's speech ... (and) it seems as if the potential that there won't be a rate cut is weighing negatively on the Treasury market.
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The bottom line message is that the labor market activity remains robust, and that's not the environment that would suggest a need for a Fed rate cut.
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The way the market is performing now sets the stage for a big rally if there are any data that prove disappointing on the economic outlook in the coming weeks.
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It is my belief that the Fed is targeting the equity markets with this more aggressive provision of liquidity, ... The Fed wants the stock market to do some of the heavy lifting to get this economy moving.
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I get the impression he is building the market up to expect a rate hike at the June Federal Open Market Committee meeting.
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Whatever is transpiring in the market, especially this week, is against the backdrop of extra negative sentiment, so the market is prone to react to bad news.
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The claims numbers are suggesting that the worst of the labor market conditions are behind us and that there's actually some modest improvement in relative terms as the year comes to a close,
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The follow-through in the secondary market shows just how strong it was, ... a sense that people want to own this issue because it will appear on their year-end statements.