Wall Street is one-way street right now and it is going whichever way the Treasury market takes it. Big-tech might attract the most attention, a most needed rebound after Apple flirted with bear-market territory and Tesla plummeted over 40% from record highs set in January. The cyclical rotation has been running strong for months and today is an overdue buying the dip for technology stocks. The move in tech stocks coincides with the rally in Treasuries, so many traders will be skeptical that this rebound will stick.
Big-tech and meme stocks are leading the charge higher which for someone reason doesn’t surprise me. GameStop is up 18% Tesla is 11.1% higher, while Apple rose by 3.4%. It’s the return of every millennial traders’ favorite bet and it could last a little while longer until bearish bias for bonds returns.
The NFIB Small business index for February was nothing to brag about. The headline index increased to 95.8, higher than the prior 95.0 prior reading but lower than the consensus estimate of 97.0. The NFIB report noted that February was a tough weather month that undoubtedly held back economic activity. Half of the 10 Index components improved, four declined, and one was unchanged. Current job openings and earnings trends provided the strongest contributions to the index.
Biden’s COVID relief bill will provide another boost for disposable income and that should continue supporting consumer spending. Still the majority of recent stimulus checks have gone to savings, so expectations are high that pent up demand will run spending hot once Americans are comfortable to return to pre-pandemic behavior.
The global bond market rally will closely watch a wrath of debt auctions in the US. Fixed income traders will have to get used to seeing a ton of supply flood the market. Today, the Treasury will sell $58 billion in three-year notes, tomorrow has $38 billion of 10-year securities, and on Thursday will see $24 billion of 30-year bonds. A week from today $20 billion of 20-year bonds will be sold.
The bond market is starting to get concerned with how strong demand will be for these auctions, especially considering how brutal the 7-year auction went two weeks ago. The 7-year notes auction had terrible demand and that was the catalyst that helped send the 10-year Treasury to 1.60%.
The fate of the dollar could be determined by these upcoming auctions, which could suggest any weakness beforehand could be short-lived.
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