Bond rates continued to fall on Thursday, with the benchmark 10-year US Treasury note yielding less than 1.3 percent, down from 1.45 percent at the start of the week and 1.6 percent just a month ago. As a result, the Dow industrials DJIA, +0.30 percent and the S&P 500 SPX, +0.34 percent indexes have been battered, while the Nasdaq COMP, +0.01 percent and its tech stock favorites, such as Amazon AMZN, +0.57 percent, have fared relatively better.
Bond prices and yields have the following inverse relationship: When prices are high — indicating high demand — yields, or the returns offered to investors, are low. Investors who want to lock in future gains by purchasing bonds are seeing strong demand, which indicates a drop in economic growth prospects. This has a knock-on effect for the Dow and S&P 500 blue-chip businesses, whose earnings are linked to economic growth. It’s a brighter picture for “growth” stocks, which include higher-tech businesses like Apple AAPL, +1.80 percent, and Tesla TSLA, -2.26 percent, because their share prices are based on future profits forecasts, which are discounted when yields climb. Doug Kass, president of Seabreeze Partners Management, has gathered information from experts to explain why yields are declining. Kass writes, “The 10-year-note price has bucked mainstream expectations.” “With domestic and global economic growth resuming, there has been no stronger consensus view [than] that U.S. interest rates should rise.” However, the exact reverse has happened.
Because the globe is “awash with inputs,” according to David Rosenberg, chief economist at Rosenberg Research & Associates Inc., the focus should be on aggregate supply rather than aggregate demand. A global excess of labor, commodities, and capital, as well as a savings surplus, are intrinsically deflationary, forcing interest rates lower. Globalization, innovation, and demographic changes such as an aging population have all contributed to this. It’s all about arithmetic for Hoisington Investment Management Company economist Lacy Hunt. “At the moment, each new issue of government bonds, notes, and so on has an ever-smaller incremental stimulus to GDP,” Kass says of Hunt’s viewpoint. Simplified: From the Second World War onward, Hunt’s analysis demonstrates that the impact of increased government debt on economic growth has waned, with each new dollar of debt resulting in ever-smaller percentage increases in yearly growth. Inflation is stifled, and yields are falling. The commotion Attorneys general in 36 states and the District of Columbia have filed lawsuits against Google and its parent company Alphabet GOOGL, +0.23 percent GOOG, +0.24 percent for antitrust violations. The lawsuit, which is set to go to trial in 2022, stems from developer complaints and focuses on Google’s Play Store app platform, including the need that some apps use the company’s payment mechanisms, with Google taking up to 30% of sales. On the economic front in the United States, investors can look forward to data on new unemployment claims for the previous week at 8:30 a.m. Eastern time. With an estimated 350,000 Americans filing for unemployment benefits, claims are projected to decline. At the same time, continuing jobless claims for the week ending June 26 will be released, followed by May consumer credit data. Elon Musk’s tunneling company received legislative approval for its plan to develop an underground rail system in Fort Lauderdale. The “Las Olas Loop” is said to transport people in Tesla TSLA, -2.26 percent vehicles from the city’s downtown area to the beach. Children in New Zealand are becoming unwell in large numbers, with some of the problem being attributed to COVID-19’s “immunity debt.” Children have avoided a variety of ailments as a result of lockdowns, social isolation, and sterilizing regimens, physicians claim, causing their immune systems to suffer. Is COVID-19 also returning? According to a study from Imperial College London, socialization during the Euro 2020 soccer tournament may be to blame for an increase in COVID-19 infections among English men. From June 24 to July 5, men had a 30% higher risk of testing positive for the virus than women, according to researchers. The financial markets Futures for the Dow industrials YM00, -1.40 percent and the S&P 500 ES00, -1.37 percent and Nasdaq NQ00, -1.38 percent indicate to a difficult day ahead, with Dow industrials YM00, -1.40 percent down over 500 points and declines approaching 1.5 percent projected at the open.
As a result, the United States is on pace to follow Europe’s and Asia’s decline.
SXXP is down 1.84 percent, UKX is down 1.88 percent, PX1 is down 2.35 percent, DAX is down 1.92 percent, and Asia NIK is down 0.88 percent, HSI is down 2.89 percent, and SHCOMP is down 0.79 percent.
Bond yields are rising, putting pressure on equities markets, with 10-year U.S. Treasury yields TMUBMUSD10Y, 1.279 percent falling below 1.26 percent. The graphs
The graph is courtesy of the Wolf Street finance blog.
The graph is courtesy of the Wolf Street finance blog.
In June, Fannie Mae’s monthly National Housing Survey revealed new highs for trend shifts. According to our charts of the day, a record 64 percent of people believe it is a bad time to buy a property, while an all-time high of 77 percent believe it is a good time to sell a home, according to Wolf Richter of the Wolf Street financial blog. “At these outrageous prices, if these sentiments become reality over time, it will be a sea change for demand and supply,” Richter added. “Each of these astute and motivated sellers wanting to cash in at these absurd rates must find a buyer of the opposing viewpoint who believes they are getting a good deal, which is what creates a market.” Reads at random Dusting for good luck: On the Fourth of July, a Florida man uncovers a months-old Powerball ticket worth $1 million while cleaning his home. Animal spirits: As part of a national effort to protect animals, the Oakland Zoo is utilizing an experimental vaccination to inoculate its large cats, bears, and ferrets against COVID-19. Need to Know starts early and is updated until the opening bell, but you can sign up to have it delivered to your inbox all at once by signing up here. At around 7:30 a.m. Eastern time, the emailed version will be sent out. Do you want to know what’s in store for the rest of the day? Sign up for The Barron’s Daily, a daily investor briefing that features exclusive opinion from Barron’s and MarketWatch writers./n
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