The Market Today

Friday’s Economic Calendar is Empty; Equities Attempt to Recover as Rates Fluctuate


by Craig Dismuke, Dudley Carter

CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)

EMA Reaffirms its Conclusion that the AstraZeneca Vaccine is Safe, Effective: The European Medicines Agency reaffirmed its previous conclusion that the benefits of the AstraZeneca vaccine outweigh the risks after reviewing reported cases of blood clots in some recipients of the shot. The group said the cases didn’t appear to be tied to the vaccine, although they didn’t “definitively” rule out a linkage, and said the overall risks of blood clotting were not elevated above normal. Germany, Portugal, Spain, France, Bulgaria, Slovenia, and Italy were among the countries to later announce they would resume use of the shot, while others such as Sweden and Norway said their pause would continue.

U.S. Pandemic Trend Continues to Diverge from Europe’s: Thursday brought more evidence of divergent paths for the U.S. and European pandemics. President Biden confirmed the U.S. would hit his target for 100 million shot in his administration’s first 100 days a month earlier than expected. His press secretary said the U.S. is open to requests from other countries for doses of vaccines. CNBC reported that the President was looking at mid-May to start relaxing restrictions on travel. In Europe, however, France’s prime minister said the virus spread appears to be in a third wave as he announced a new four-week lockdown for sixteen areas of France, including Paris.


24 HOURS OF MARKET ACTIVITY

Stocks Sank Thursday as Treasury Yields Spiked: U.S. stocks struggled mightily Thursday on a sharp rise in longer Treasury yields and a steep decline in the cost of crude. The Fed refreshed its forecast on Wednesday to reflect much stronger growth in 2021 and a quicker labor market recovery, but still projected no rate increase before 2024. With the Fed comfortable allowing economic momentum to build until actual inflation appears, the 10-year yield ended Thursday up 6.5 bps at 1.71% after earlier rising by as many as 11 bps to an intraday peak of 1.75%. The Nasdaq responded by tumbling more than 3% as the S&P 500 fell 1.5% and the Dow slipped 0.5%. The 2-year yield pressed 2.0 bps higher to 0.15%, leaving the gap between it and the 10-year yield 4.0 bps wider at 1.55%, the highest since July 2015. Tracking other assets, the Dollar recovered to just shy of its pre-Fed level, providing a partial explanation for the severe drop in the cost of crude. U.S. WTI, which had declined in the previous four sessions on concerns about Europe’s recovery, sank another 7% Thursday to $60 per barrel, a two-week low. The energy sector was the worst performer in both the Dow and S&P 500.

Global Stocks Head Lower While U.S. Futures Inch Up on Rate Relief: Global shares were generally lower Friday following yesterday’s weakness on Wall Street. Stocks declined around 0.6% in Asia and Europe’s Stoxx 600 had traded 0.4% lower before 7 a.m. CT. U.S. futures, however, recovered slightly as Treasury yields pulled back after yesterday’s spike. Nasdaq futures had risen 0.6% while the S&P 500 gained 0.2%. The Dow edged higher but was essentially flat. Offering some relief, the 10-year Treasury yield had dropped 2.6 bps to 1.68%, lagging larger declines across Europe. Japan’s 10-year yield inched 0.5 bps higher to 0.102% following the Bank of Japan’s (BoJ) latest decision. Signaling comfort with higher yields in its own way, the central bank widened the range in which the 10-year yield can fluctuate around 0.00% to 25 bps (previously presumed to be 20 bps). The bank also said its purchases of ETFs will now be solely focused on the TOPIX index, explaining that index adding 0.2% while the Nikkei declined 1.4%. Banks were the top performers on the TOPIX after the BoJ also announced a “scheme” to limit the impact on financial institutions if its policy rate is cut further into negative territory.


TODAY’S CALENDAR

There are no reports on today’s economic calendar.


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