S&P Futures Sell off on Rates and Geopolitics – where to now?

We look at the S&P 500 as it continues its slide after last week finished pressuring asset prices, fear levels rose and confusion reigns. Both market participants and Central Bankers are acting belligerent in where they think prices should be. Bottom line is we getting robust signals from the economy about a year-and-a-half into upward pressure on market-based borrowing costs, why?

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The US stock market started this holiday-shortened week with a broad sell off amid rising market rates and increasing geopolitical tension. The Dow Jones Industrial Average has given back all of its 2023 gains, down 0.1% on the year. The S&P 500 for its part closed the session just a bee’s #$^ from the 4,000 level.

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All 11 sectors closed with a loss, energy (-0.3%) and consumer staples (-0.3%) were the only sectors to decline less than 1.0%.  Information technology (-2.4%) and communication services (-2.3%) sectors suffered from the mega caps, The Vanguard Mega Cap Growth ETF (MGK) was down 2.4% versus a 2.0% loss in the S&P 500 and a 2.2% loss in the Invesco S&P 500 Equal Weight ETF (RSP). 

The 2-yr note yield rose 12 basis points today to 4.73% and the 10-yr note yield rose 13 basis points to 3.96%. Selling in the Treasury market accelerated after this morning’s release of the preliminary IHS Markit Manufacturing and Services PMI readings for February, along with the softer-than-expected Existing Home Sales Report for January.

Geopolitical tensions scuttled both the bond and stock markets today. The CBOE Volatility Index rose 14.1% or 2.82 to 22.84 today. 

The Wall Street Journal reported earlier that China’s President Xi will likely head to Moscow in April or May to meet with President Putin and encourage peace talks. That view runs counter to Secretary of State Blinken’s accusation over the extended weekend, reported in The New York Times, that China is considering providing lethal assistance to Russia. Meanwhile President Putin announced Russia will suspend its participation in the New START nuclear treaty.

  • Nasdaq Composite: +9.8% YTD
  • Russell 2000: +7.2% YTD
  • S&P Midcap 400: +7.0% YTD
  • S&P 500: +4.1% YTD
  • Dow Jones Industrial Average: -0.1% YTD

Trust you all had a great day, sleep well and get your trading plan sorted.

Any questions please feel free to ask them below. Trade Smart!