Last Week's Close
E-mini S&P 500 (June): Settled at 3899.75, down 6.25
E-mini Nasdaq-100 (June): Settled at 12,844.50, up 64.75
U.S. benchmarks were all trying to point higher ahead of the opening bell. Tech is broadly leading the way and the Nasdaq is up nearly 1%. Positive tailwinds are coming from AstraZeneca’s vaccine trial results in the U.S.
The vaccine was suspended throughout the EU after concerns it caused blood clots. Trials across the U.S., Chile, and Peru showed the vaccine 79% effective with no link to blood clots. This comes after the European Medicines Agency confirmed similar findings last Thursday.
Despite the upbeat news, it’s important to note that Bonds are higher. On Friday, the Federal Reserve announced that they won’t extend the pandemic exemption on Treasuries when calculating bank capital requirements. The news pressured the complex, but neither the 10-year Note nor the 30-year Bond took out Thursday’s low and have now traded higher than before the announcement.
A reprieve in rates would be a supportive tailwind to risk-assets, but some of the strength comes on the heels of news in Turkey where President Erdogan suddenly dismissed another central bank head; this time, after he raised rates more than expected. The Dollar gained as much as 17% against the Lira as the local stock benchmark fell 9.2% and yields on the country’s debt surged.
This stew of news includes a somewhat-expected Fed announcement forcing the last bit of bank selling in Treasuries coupled with a fresh, yet minor, catalyst for a bid; today’s price action will be crucial in helping to form a near-term bottom.
With Treasury volatility front and center, Fed Chair Jerome Powell graces markets with his presence for 3 straight days. Today may have been the quieter of his appearances when he spoke on central bank innovation at 8:00 a.m. CT. Tomorrow, he begins a 2-day Congressional testimony along with Treasury Secretary Janet Yellen. If he doesn’t make an impact today, others will certainly have a shot.
Richmond Fed President Thomas Barkin spoke at 9:00 a.m. CT, San Francisco Fed President Mary Daly speaks at noon CT, Fed Governor Randal Quarles at 12:30 p.m. CT, and Fed Governor Michelle Bowman at 6:15 p.m. CT. All are 2020 voters.
More micro, Kansas City Southern agreed to merge with Canadian Pacific in a $25 billion deal. We find the fresh M&A news to be a bullish tailwind, and especially so in a sector that acts as the heartbeat to the rebound in economic activity.
Elsewhere, an already tight supply network of chips took another hit over the weekend due to a fire at Japan’s Renesas. Toyota is down 2.5%, but most chipmakers are higher on the session. Disclosure: Blue Line Capital owns Kansas City Southern, Micron and Marvell.
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