Battle Lines Drawn
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The S&P, other indices, and Crude break support. Yields fall and lift metals.
U.S. equity benchmarks slipped sharply to start the week. It is no coincidence the odds of at least 100bps worth of Fed hikes through its February meeting have risen to 63.7%, according to the CME’s FedWatch Tool. Strong Wage Growth on Friday’s Nonfarm Payrolls, followed by a re-acceleration in Services via yesterday’s ISM Non-Manufacturing, has underpinned the rise in hike expectations from a coin flip one week ago. The yield of the U.S. 10-year Treasury has also responded, not just fundamentally to the data, but from technical support at 3.5% area, or 114’16-115’00 in the futures. Rising yields will tighten conditions and the risk appetite. Bill Baruch discussed just this on yesterday’s CNBC Halftime Report.
Today’s economic calendar is quiet, but things begin to pick up through midweek. U.S. Trade Balance data is due at 7:30 am CT. Although inflation is showing signs of being contained for the moment, the fear is a sharp slowdown in global growth. Services data from China and the Eurozone contracted more than expected to start the week. We then look to Trade Balance data from China tonight. On the earnings front, Toll Brothers will be closely watched tonight. The homebuilder is known to specialize in higher-end homes, but what has been the impact of rising rates?
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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future resultsOn the date of publication, Bill Baruch did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.