Well we are seeing a bit of relief today in the 10 year treasury yield which is now trading at 4.56% which is off about 6 basis points from last weeks close. I don’t see any particular reason for the movement–could just be that lots of bond folks are taking a long holiday and prices move with small volume.
Equities got hammered earlier today, but have bounced quite a bit from the lows–in fact more than 50% of the earlier losses have been erased. Vloumes on the S&P500 are pretty decent–don’t think these folks are taking a long holiday.
No trading for me today–although I am going to once again review the portfolio, which is green today for a change, and see if there is a need to continue some rearrangement of holdings.
Well how are we going to end the year– can we get a late year rally or will we see the continuation of some profits taking? Of course no one knows–but there are plenty of unknowns for the year ahead so maybe we will simply tread water for the week. On the other hand it is likely interest rates will be in the drivers seat and with the 10 year closing last Friday at 4.62% I am concerned that we could see a push higher which would likely torpedo any rally chance
Last week we had the S&P500 move around in a just less than 3% range but ended the week up from the previous Friday by just under 1%. The index continues at just around 2% below all times highs–while it feels painful to some obviously a 2% setback is nothing.
Interest rates climbed higher once again closing at 4.62%–10 basis points higher than the close the previous Friday and 22 basis points above 2 weeks ago. We are at the highest weekly close since Friday April 24th which closed at 4.65%. This week is another quiet week as far economic data is concerned with no real market moving data on inflation slated to be released.
The Federal Reserve balance sheet contracted by another $4 billion with the Fed leaving the ‘run off’ in place at the last FOMC meeting.
Once again the average $25 preferred stock and baby bond took a fall last week. The average share fell by 21 cents to the lowest level since the week ending 6/28/2024. Investment grade issues fell by 32 cents, banks fell by 21 cents with CEF preferreds off 3 cents, mREIT issues 20 cents with shippers off just 2 cents.
Yesterday we got 1st time unemployment claims which came in at 219,000 which is relatively tame compared to a forecast of 224,000 BUT continuing claims came in at 1.91 million which is up from last week which was at 1.87 million. As I have mentioned I watch the employment numbers very closely–they are the ‘canary in the coal mine’ relative to the overall economy. It is tough to see the economy falling off a cliff if everyone that wants a job has a job.
Interest rates right now seem to be ‘stuck’–right at 4.60% (more or less). What is going to push rates higher–or lower? GDPNow from the Atlanta Fed is showing 3.1% as of 12/24/2024–if this is close it will be no help for lowering rates. Employment is not looking to be of much help for lower rates. The scariest thing from my perspective is we have no real idea on what government spending will be down the road (actually we all have opinions for sure)–are the bond vigilantes going to take over and ‘force’ discipline on the government? I don’t know the answer, but I am certain that there are some money folks out there that are licking their chops at the possibilities for making a killing in the debt market if something goes wrong.
The CLO owner company’s – Eagle Point Credit, Oxford Lane etc, hold portfolios of leveraged loans–loans to company’s rated BB or lower. As such I watch the data on the overall collateralized loan obligation (CLO) market whenever I can find it.
Here is an article from S&P Global on defaults etc in the leveraged loan sector. It is one of the best overviews of the market that I have seen in quite a while.
