The relief rally of the last two weeks has vastly improved the technicals of the indexes but will it be enough to keep us moving higher. In the bull’s favor, we have the possibility of the end-of-quarter window dressing as institutions put new investor money to work. In the bear’s favor, we have a possible risk-off scenario beginning to occur with a bond yield inversion as inflation worries grow. If that’s not enough to keep traders on edge, then add in a hectic week of possible market-moving economic reports, and we have a recipe for challenging price volatility.
Asian markets traded mixed and relatively flat as Shanghai went back into partial lockdown. Across the pond, European markets see green across the board. However, facing bond inversion fears, International Trade numbers, and a 2-year auction, rising recession fears suggest a mixed open well off the overnight lows. So, get ready for just about anything as we finish this wildly volatile quarter!
Economic Calendar
Earnings Calendar
To kick off the last four trading days of the 1st quarter, we have more than 30 companies listed on the calendar, with the majority unconfirmed. Notable reports include AND, AVAH, BITF, PLAY, JEF, TPG & XPEF.
News and Technicals’
The yield on the 5-year Treasury note rose five basis points to 2.6309% at 5:05 a.m. ET, while the 30-year yield was less than one basis point to 2.5956%. This is the first time the shorter-dated Treasury yield has risen above the longer-dated U.S. government bond since 2006. President Joe Biden’s job approval ratings keep falling in his second year in the White House. Just 40% of Americans approve of the job he is doing, an NBC News survey finds, the lowest rating Biden has seen in his presidency. Biden’s drop in approval comes as a large majority of Americans continue to say the U.S. is headed in the wrong direction, the poll found. Since the beginning of March, five cargoes of Russian oil, or about 6 million barrels, have been loaded and are bound for India – set to be discharged in early April, said Matt Smith, lead oil analyst at Kpler. “This is about half the entire volume discharged last year — a significant uptick,” he told CNBC. If China also buys oil from Russia – also widely expected to be discounted – it could impact crude prices, analysts said. “Urals crude from Russia is being offered at record discounts,” the International Energy Agency said on March 17. Shanghai, a city of 26 million people on the southeastern coast of China, is a hub for finance and international business in the country. Municipal authorities ordered half of the city to lock down for mass virus testing from Monday to Friday morning. Shanghai International Port Group, which manages the city’s ports, said in an online statement Monday production units generally maintained 24-hour operations. President Joe Biden proposed a new 20% minimum billionaire tax. The “Billionaire Minimum Income Tax” would assess a 20% minimum tax rate on U.S. households worth more than $100 million. Over half the revenue could come from those worth more than $1 billion. As the short-term treasury yields begin to invert as investors worry about a recession, the 10-year moved only slightly higher in early Monday trading to trade at 2.5066%, and the 30-year ticked slightly higher to 2.6004%.
Technically speaking, the last couple week weeks have vastly improved the technicals of the index charts. However, the sharp rally on meager volume combined with the possible over-extension in the prices in the short-term remains a concern. On the one hand, due to the end-of-quarter window dressing, we may still see more extension as institutions put new money to work in the market. But, on the other hand, the yield curve inversion in the 5-and-10 year bonds has the potential to derail bullish plans triggering risk-off conditions in the market. In addition, we have a hectic week of market-moving economic data to keep traders on edge and price volatility high and challenging to navigate. Finally, today we have International Trade numbers and the rapidly rising 2-year bond auction to contend with as we slide toward the end of this very volatile first quarter of 2022.
Trade Wisely,
Doug
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