- US equity markets have pulled back from opening levels, with the S&P 500 now trading flat around 3,910.
- Equity investors remain concerned about the potential impact on the stock market from the ongoing tantrum in the bond markets.
The US stock markets They have pulled back from opening levels, with the S&P 500 now trading flat around 3,910, having been as high as 3,930 in pre-market trading (S&P futures). The economic context remains optimistic; The US data this week has been strong enough to fuel optimism that the US economy continues to recover well in the first quarter of 2021, but not so strong as to seriously undermine the case for a greater fiscal stimulus.
Big Retail Sales data for January, released Wednesday, shows Bank of America and Goldman Sachs tracking the annualized growth rate of US GDP at 5.5% and 6.0% respectively. Meanwhile, the launch of the vaccine in the US is going well and the rates of infection, hospitalization and death from Covid-19 continue to decline. As a result, states increasingly ease economic constraints.
All of the above is cause for optimism and keeps the S&P 500 above 3,900. But equity investors remain concerned about the potential equity market implications currently seen in the US (and global) bond markets. US 10-year yields rose more than 5 basis points on Friday above 1.34%, more than 14 basis points for the week. The rally is even sharper in real returns; the 10-year TIPS yield is now around -0.78%, down from -1.0% at the end of last week.
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