DJIA Pullback Linked to Bond Market Not DC Disclosures

DJIA Pullback Linked to Bond Market Not DC Disclosures

DJIA Pullback Linked to Bond Market Not DC Disclosures


Last week’s US stock market pullback related to movements in the bond market, and not to the release of a GOP House Intel memo that accuses FBI and DOJ investigators of anti-Trump bias, that has indicated President Trump in the Russia probe.

 President Trump’s position is bolstered by the release of the memo.

Friday, the DJIA  Friday fell 2.5%, the biggest decliner since June 2016

The S&P 500 stock index lost 2.1%

The NAS Comp dropped 2.0%

Year to Date aveages

  • NAS: +4.9% YTD
  • S&P 500: +3.3% YTD
  • DJIA: +3.2% YTD
  • Russell 2000: +0.8% YTD

House Republicans released a not-classified memo that accused the FBI and Justice Department of abusing their surveillance powers to spy on a former Trump campaign adviser, Carter Page, thus lighting a political firestorm.

Led by Representative Devin Nunes (R-CA) the Chairman of the House Intelligence Committee, Republicans said the memo revealed an abuse of surveillance powers by the executive branch as it probed Russia’s interference in the Y 2016 election and ties to The Trump Campaign.

“I think it’s terrible, if you want to know the truth,” President Trump said when reporters asked about the memo. “I think it’s a disgrace what’s going on in this country… A lot of people should be ashamed of themselves, and much worse than that.”

Savvy investors are focused on the bond market’s reaction to economic data such as wage growth. Employment surged in January and wages rose the most in more than 8-1/2 years, data from theUS Bureau of Labor Statistics showed Friday.

The report led investors to expect that inflation will push higher this year as the labor market hits full employment.

The US economy is moving at a higher/faster growth trajectory, as a consequence principally of the tax reform bill which has been embraced by corporations faster than almost anybody thought possible, including me. And that means interest rates will be adjusted by the Fed.

We have to wait to see when.

Technically, we are keep our eyes on the DJIA 50-Day MA, the Key support, at 25,120.

Last December, President Trump approved a sweeping tax reform bill that cut corporate tax rates and urged companies to transfer trillions of dollars held overseas back to the US

Friday’s Bond Yield Check

  • 2-yr: -2 bpts to 2.14%
  • 5-yr: +4 bpts at 2.60%
  • 10-yr: +8 bpts at 2.85%
  • 30-yr: +9 bpts at  3.10%
Economist Larry Kudlow said in a TV interview Friday, “If you’re operating a stock market model of capitalized corporate profits, which is my favorite model, the discount rate, I prefer the Baa corporates but if you use the 10-year Treasury and you multiply that through your profits expectations, the market has to adjust. It will be a downward adjustment, and this may take a bit.”
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.37) Bullish (0.28) Neutral (0.17) Very Bullish (0.67)

Have a terrific weekend.

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