India  
NewsR.in
> >

The Market Gets Optimist About Growth - What To Watch for Next

Video Credit: The Street - Duration: 02:05s - Published < > Embed
The Market Gets Optimist About Growth - What To Watch for Next

The Market Gets Optimist About Growth - What To Watch for Next

Ever hear someone say: "Well, the market is telling us that the economy is going to do this or that"?

Well, the market was giving us a very clear signal Friday, potentially making stocks vulnerable right now.

What's Happening?

President Trump said he is considering extending a "partial" trade agreement proposal to Chinese leader Xi Jinping.

This comes after China struck a more conciliatory tone in recent comments from its Finance Ministry.

Plus, China said it will exclude soybeans and pork from its current list of tariffed items coming into China from the U.S. Ever since Trump and Xi agreed to meet in October to talk trade, investors have priced in optimism that a trade deal will eventually be reached.

What's the Market Doing?

So the S&P 500 rose as much as 0.3% Friday, before that gain moderated to a flat intraday move by the end of the day.

Investors are getting more optimistic that, with some tariffs potentially removed, some economic drag will be removed from the equation.

Importantly, the U.S. economy is still decelerating independent of the trade war.

As this breeze of optimism about growth blew into the market, the benchmark 10-year treasury yield rose as investors fled bond (bond prices move inverse to yields).

The 10-year yield rose to 1.87%, up from 1.55% a few days ago.

Meanwhile, the 3-month treasury yield fell to 1.98%.

The inversion between the 3-month and 10-year treasuries is now less deep than it was several days ago, another incremental "risk on" signal.

This indicates the market is pricing in a slightly lower probability of two Federal Reserve interest rate cuts, both of which may not be necessary should the economy's deceleration moderate on better trade relations.

The chances of two rate cuts stand at 88%, according to data from the CME Group, down slightly from a few days ago.

As yields rose, so did bank stocks, which partly rely on their net interest margin (borrowing short term in order to lend long-term) for stronger profits.

Bank of America rose 1.6%.

Wells Fargo rose 0.48%.

JPMorgan rose 1.78%.

The Risk in Stocks Going Forward Simply put, the Fed may not cut rates twice, which the stock market is still pricing in, with the S&P 500 up 20% year-to-date.

If Fed Chairman Jerome Powell announces in 2019 there won't be two cuts, stocks will likely fall.

Many on Wall Street have said lower rates (slightly higher Friday) are merely "supportive" of equities at the market's current level, rather than stimulative.

The economic drag created by the trade war, as businesses uncertain about the future invest and hire less, would outweigh the positive impact of lower rates, many have said.

The market may need that support level.

JPMorgan is a holding in Jim Cramer's Action Alerts PLUS member club.

Want to be alerted before Jim Cramer buys or sells JPM?

Learn more now.

0
shares
ShareTweetSavePostSend
 

Recent related news from verified sources

Fed rushes to plug cash shortage in short-term loan market

WASHINGTON (AP) — A peculiar thing is happening in financial markets this week — a corner of the...
Seattle Times - Published

Colt suspends production of AR-15, other rifles for civilians

CEO says consumer market for rifles is saturated, with gunmaker to focus on supplying military and...
CBS News - Published


You Might Like


Recent related videos from verified sources

Ryan Michelle Bathe on Raising Black Children [Video]Ryan Michelle Bathe on Raising Black Children

Actress Ryan Michelle Bathe recalls a moment she experienced at a farmer's market when a vendor mistreated her son.

Credit: OWN - Affiliate     Duration: 01:03Published

Peaky Blinders Season 5 Trailer [Video]Peaky Blinders Season 5 Trailer

Peaky Blinders Season 5 Trailer As the Shelbys grapple with the 1929 stock market crash, Tommy confronts new threats to his power from younger family members and fascist rivals. Peaky Blinders..

Credit: Teaser-Trailer.com     Duration: 01:50Published

Environmentally friendly: newsR is hosted on servers powered solely by renewable energy
© 2019 newsR Ltd. All Rights Reserved.
About us  |  Contact us  |  Disclaimer  |  Terms & Conditions  |  Content Accreditation
 RSS  |  News for my Website  |  Free news search widget  |  In the News  |  DMCA / Content Removal  |  Privacy & Data Protection Policy
How are we doing? FeedbackSend us your feedback  |   LIKE us on Facebook   FOLLOW us on Twitter  •  FOLLOW us on Pinterest