Economist's Insights

Today’s Trading Activity – Stocks Rebound After Two Days of Disappointment Supporting a Bounce Back in Treasury Yields

Nov 16, 2017

After two days of disappointing results, the “buy-the-dip” trade finally worked and U.S. stocks more than recouped two days of losses. All three major indices rallied sharply to their highest levels of the week with the Dow and S&P both gaining 0.8% in their best day since September 11. The Nasdaq outperformed the with a 1.3% gain representing its biggest daily gain since October 27 and its seventh best daily result of 2017. The back-to-back days of equity volatility was one of the strongest two-day stretches for 2017 in what has been a historically subdued year of trading. Those gains materialized despite shares of energy companies continuing to drag on the broader indices. Crude prices fell for a third day in their longest losing streak since early October. Although the House’s passage of the tax bill was likely a shot in the arm for the indices, the positive momentum was already well cemented in the day’s trading patterns. Treasury yields had risen overnight but longer yields actually pulled back from their daily highs even as stocks began their trek higher. After moving sideways for most of the day, however, those yields jumped in the afternoon to close at their daily peak. After tightening 10.5 bps over the last three sessions, the spread between the 2-year and 10-year yields widened 2.8 bps. The 2-year yield rose 2.5 bps to 1.71% while the 10-year yield climbed 5.3 bps to 2.38%.