Daily Market Update – May 6 , 2015 (7:30 AM)
Yesterday, should have been a quiet day, but then someone remembered that bonds were starting to pose a threat to stocks, as their interest rate has been climbing higher and higher.
That move isn’t the first one in the past couple of months, as an earlier one mis-read the likelihood of the FOMC making an interest rate change and then very quickly retreated.
This week Friday’s Employment Situation Report could make the difference between those rates going higher or returning below 2%.
Last month’s report was pretty abysmal, but this time around the expectations are for some good numbers, returning to a stronger path that had been the case up until very recently.
Whether a strong earnings number heats up concerns over an interest rate increase is anyone’s guess, but it probably would do so.
In light of bond rates moving higher and the FOMC removing any calendar references to the timing of an increase, while re-iterating its dependence on data, would make you think that the slightest evidence of an economy heating up might finally be enough to move those rates higher.
Then we will probably get a collective sigh and maybe that will prove to be the catalyst for the market itself moving higher. After all, even at 2.2%, the bond market isn‘t that much of an attractive competitor to stocks.
Yesterday’s plunge seemed to be entirely related to bond worries and this morning the market, if it follows the recent pattern, will be setting itself up for a recovery bounce higher, albeit on much lower volume.
So far, as the morning futures are trading, at least there’s a mild move higher in advance of the ADP release. That release, unless it is really somewhere unexpectedly high or low, doesn’t do too much to move the needle, but does give people a sense of where the government employment statistics may be leaning.
For now, my eyes and attention is focused on trying to extricate from any positions that are due to expire this week. Yesterday’s decline made both the prospects or rollovers and assignments become more and more distant, but lately big moves have become more frequent, so you never do know what may unfold over the next couple of trading days, especially with a big event on Friday.
More importantly, at this point, is being left in a good position so that next week’s monthly option cycle ending week goes off smoothly and delivers a good combination of rollovers and assignments.