Yesterday was another yawner in the markets with stocks/equities and bonds/rates/debt closing nearly unchanged. The good news for us was that after the 10yr treasury auction mortgage bonds seemed to regain some of the strength they had lost with the talk of winding down Fannie/Freddie.
Today is the data flood, compared to what we’ve had all week, and the most important number has already come in stronger than expected. New Jobless Claims, which were low last week, are even lower this week showing marked improvement in employment. Retail Sales also came in slightly higher than expected. This is good news for stocks and the market is already showing a nice bump up in the preopen, even after some disappointing industrial production data from China earlier this morning.
How bonds will fare with this news remains to be seen though. Import/Export price data out this morning showed a much bigger increase than expected. This is an inflationary sign that will likely tend to push rates upwards. Given the natural interaction between stocks and bonds- the stock lever effect- that often sees rates rising when stocks rise, today is setting the stage for higher rates.
So keep an eye out today- things could get interesting.
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