Equites were bifurcated as the Dow advanced about 1.0% while the NASDAQ was essentially unchanged. Energy, finance and the industrials led the advance.
Treasuries sold off across the spectrum amid fears of escalation of warfare in Ukraine and the murky outlook for both Federal Reserve interest rate cuts and leadership at the US Treasury Department. The curve steepened nominally.
Swap traders are now roughly even split on where policy makers will lower rates by a quarter if point or leave them on hold when they meet next month.
Bloomberg writes the options market is targeting a 40 bps increase in 10-year yields when the November jobs report is released on December 6.
The outcome is becoming murkier especially as it relates to potential Trump policies and how they may impact inflation. It is almost universally accepted that tariffs may increase inflation. However, if DOGE fires 500,000 federal workers, as some estimates suggest, such actions are potentially recessionary.
All must remember that Administrations propose policies, but it is Congress that approves most policies. A restructuring of the Federal Government as tentatively proposed will generate great controversy in the bureaucracy and for elected officials.
What will happen today?
Last night the foreign markets were mixed. London was up 0.94%, Paris up 0.10% and Frankfurt up 0.36%. China was down 3.06%, Japan up 0.68% and Hang Seng down 1.89%.
Futures are nominally lower for a myriad of reasons including geopolitical tensions, monetary policy assumptions and uncertainty around the upcoming Trump Administration. The 10-year is up 7/32 to yield 4.40%.
Kent Engelke
Chief Economic Strategist Managing Director
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.
