The Market Today
Pandemic Continues to Plague Many Countries
by Craig Dismuke, Dudley Carter
Mortgage Applications Benefit from Lower Rates: Mortgage applications rose 8.6% in the week ending April 16 as mortgage rates declined again. The average 30-year mortgage rate fell 7 bps to 3.20%, still 35 bps above its cycle-low. Purchase applications rose 5.7% for the week and are now down just 15% from the January peak. Refi apps jumped 10.4%, the first time activity increased in 11 weeks. Refis remain down 32% from January’s peak.
Treasury Supply: Treasury will auction $24 billion 20-year bonds at 12:00 noon CT.
CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)
European Drug Regulator Says J&J Shot’s Benefits Outweigh the Risks, Despite Rare Risk of Blood Clots: The European drugs regulator, the EMA, said Tuesday that despite a possible link between the Johnson & Johnson vaccine and rare instances of blood clotting, the benefits of the shot continue to outweigh its risks. Shortly after the decision, Johnson & Johnson, announced that it will restart shipments of its vaccine across Europe. The Netherlands announced it will resume use of the vaccine today.
Global Outbreak Remains a Concern: There continued to be evidence supporting the growing concerns about the direction of the global outbreak. Despite having the world’s worst current outbreak, India’s prime minister told the nation vaccination efforts would be accelerated even further but that lockdowns should be left as a last resort. Mexico warned of a changing trend in the pandemic across some states. Sweden’s state epidemiologist said there are no signs that spread of the virus across the country is slowing. Norway extended restrictions of entry of foreigners through at least May 12. And Tokyo confirmed that it was seeking a state of emergency declaration.
24 HOURS OF MARKET ACTIVITY
Momentum from a negative open for equities Tuesday overtook the Treasury market, dragging yields notably lower throughout morning trading. The weak start for Wall Street followed a downbeat global session that knocked most Asian indices lower and dragged the Stoxx Europe 600 1.9% further below its recent record high. While the U.S. pandemic has remained better contained, outbreaks elsewhere have deteriorated. The risk-off tone was also reflected in sharp losses for the most economically sensitive sectors. Energy companies were the worst performers, slumping more than 2.6% as oil prices fell on fears of virus-impacted global demand. By the close, the S&P 500 had shed 0.7%. Treasury yields fell early and held their risk-off price gains through to the finish. The 10-year yield dropped 4.6 bps to 1.56%, nearly a six-week low, failing to hold a move back above the technically interesting 1.60% mark.
Stocks in Asia traded lower again on Wednesday prior to a slight improvement in market sentiment that began during the European session. The Stoxx 600 had recovered 0.5% a little before 7 a.m. CT while U.S. futures stabilized. Contracts on the Dow and S&P 500 were essentially flat. Nasdaq futures dipped 0.3%, however, as shares of Netflix tanked more than 8% in overnight trading. The streaming giant beat earnings expectations but reported significantly weaker-than-expected figures for net new quarterly subscribers and projected future 2021 sign-ups. Despite another dip for most European yields, Treasury yields had staged a small recovery that nudged the 10-year Treasury yield up 1.1 bps to 1.57%.