The Market Today

CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)

White House Says Retail-Sales Surge Doesn’t Diminish Need for Fresh Stimulus: As expected, the White House was not deterred by Wednesday’s stronger-than-expected reading on retail sales from its quest for $1.9 trillion in new stimulus. Treasury Secretary Yellen said Thursday on CNBC that she believes the economy is still in need of additional fiscal support. When asked about the significant increase in retail spending, she pointed instead to the more than 9 million workers that are still unemployed and the more than 4 million who have left the labor force altogether. “It’s very important to have a big package that addresses the pain this has caused,” she said, adding, “The price of doing too little is much larger than the price of doing something big.”

Vaccinations Expected to Continue Ramping Up After Country Thaws from Winter Storms: White House Press Secretary Psaki said winter storms had delayed vaccine distribution and Dr. Fauci said distribution had come to a “grinding halt” in some areas. Dr. Fauci also said he expects Johnson & Johnson to fulfill their contract for 100 million vaccine doses by June. More broadly, Bloomberg performed an analysis of relevant statements and agreements and concluded that weekly vaccinations could hit 20 million in March on expedited manufacturing, 25 million in April and May, and more than 30 million by June. Such a scenario would allow for more than 4 million shots to be given each day, up from the current 1.6-million pace. Making headlines over the last 24 hours, preliminary studies indicate the Pfizer vaccine may remain highly effective with a single dose.

24 HOURS OF MARKET ACTIVITY

Treasury Yields Recovered Higher Despite Continued Struggles for U.S. Equities: The direction of early-morning trends held throughout the U.S. session, although the degree of the shifts moderated throughout the day. The S&P 500’s struggles continued for a third session, with the index closing down 0.4% and most sectors in negative territory. That, however, was near its best level of the day and a marked improvement from an earlier decline of 1.2%. The 10-year Treasury yield, which had dropped 4.4 bps on Wednesday, added 2.5 bps Thursday to close at 1.296%. The key U.S. yield, however, had risen as high as 1.316%, caught up in a global updraft for sovereign yields. The U.K. 10-year yield led all global increases with a 5.0-bp increase after an official from the Bank of England brushed aside the idea of a rate cut into negative territory. With stocks recently reaching new record levels and longer Treasury yields climbing to their highest levels of the pandemic, investors received mixed messages on the U.S. consumer over a 24-hour period. Retail sales blew away expectations on Wednesday but data Thursday showed an unexpected increase in new filings for unemployment insurance.

Treasury Yields Add to Thursday Recovery Ahead of February Flash PMIs: Equity futures have recovered modestly overnight even as longer Treasury yields continue to move back near their highest levels of the pandemic. After leading this week’s declines, Nasdaq futures were up 0.6%. The Dow and S&P 500 trailed with 0.3% and 0.4% gains, respectively. Prior to Markit’s U.S. PMIs, Treasury yields had inched higher across the curve. The 10-year yield was leading with a 1.2-bp rise to 1.308%, less than 1 bp from Tuesday’s pandemic-high close. Already, preliminary February PMI estimates showed manufacturing-led improvements in the Japanese and German economies, despite a dip in services activity deeper into contraction. France’s composite PMI, however, weakened as the drop-off in services activity overwhelmed the firmer manufacturing. Despite manufacturing’s improvement, the EU’s PMI rose only to 48.1, signaling continued contraction. U.K. yields were again leading the global rise in sovereign rates and the British Pound broke above $1.40 for the first time since April 2018.

TODAY’S CALENDAR

First Look at February Economic Trend: After economic activity slowed in November but appeared to regain some momentum in January, this morning will bring the first look at the broad economic trend for February.  The February Markit PMI reports on both the manufacturing and services sectors are scheduled for release at 8:45 a.m. CT.  Also today, Existing Home Sales are expected to decline 2.4% in January (9:00 a.m.).  Boston Fed Bank President Rosengren (9:00 a.m.) and Richmond Bank President Barkin (10:00 a.m.) are on the tape.