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Good morning and thank you for reading or watching this week’s Monday Morning Market Commentary. This past week we started to see a breakdown in the US markets that I have been talking about for quite some time. The week started off down and pretty much stayed down all week because of many pretty bad economic reports. We saw the biggest drop on Friday after an absolutely dismal jobs report came out. I’ll spend some time diving into this report because it sheds quite a bit of light into what is going on in the economy right now.
As usual, let’s first look at the chart of the S&P 500 from last week. After hitting all-time new highs, stocks took a big breather this week and spent most of the week in the negative. Between the US ISM Manufacturing index dropping, Europe’s unemployment hitting another new all-time high, huge rise in initial jobless claims, ADP jobs report also missing big, and the number of jobs added last month being just a quarter of what was expected, stocks really didn’t stand a chance. This all leads to an even bigger question, is the worst still ahead. The S&P 500 finished down to 1,553.28, losing just about 1% for the week.
Although stocks dropped this week, bonds continued to diverge from stocks and we saw the 10-yr Treasury yield drop to four month lows. Unlike the stock market, bonds didn’t rise throughout the day on Friday and closed near their lows for the week. The 10-yr Treasury yield had the biggest weekly drop in yields since June 2012. It ended the week all the way down to 1.694%. Continue reading
Tag Archives: Europe
Looks Like Cyprus Bail Out Is Going To Bring Stocks Down Sharply
Good morning and welcome to another Monday Morning Market Commentary. Thank you for taking the time to read/watch this week’s commentary. This past week we saw stocks continue their climb higher but this time bond yields didn’t rise as well. We also had a huge announcement over the weekend about a bail out option for Cyprus that would enforce a 10% tax on all bank deposits in the country. This is the first time we’ve seen such a tax talked about, let alone put into place. I’ll talk about this more in just a minute.
When we look at the chart of the S&P 500 from last week we see that stocks traded in a very tight range all week, less than 1% between the high and low. Stocks did close near their highs for the week, with the S&P 500 ending at 1,560.73, up 0.6% for the week.
This past week bond yields didn’t go along for the ride and we saw a sharp divergence, with the 10-year Treasury yield going down. We have seen this before and it normally isn’t good for stocks when bonds start acting like this. Remember last week when I talked about how important it would be for the 10-year Treasury yield to hold above 2%? As you can see on the chart, 2% was just a hair too much, and Treasury yields closed at the lows of the week at 1.996%. Continue reading