Optimism
February 4, 2020
–“Markets rally on virus optimism as the infection spreads.” (from Sven Henrich on twitter). As good an explanation as any I suppose. Despite an immediate $70 drop in Alphabet yesterday post-results, stocks are higher this morning. Bloomberg (the winner of the Iowa caucuses) reports this morning that Kuroda says the BoJ “…won’t hesitate to take action to cope with the virus’s economic impact if necessary.” Thanks for the reminder, but markets have already been convinced that central bankers will fight any and all threats through the greased levers of monetary policy.
–However, US rate futures are pulling back, and are currently below yesterday’s dip associated with Mfg ISM yesterday morning, which was expected sub-50 and came out 50.9. For example, EDH21 low yesterday was 9870.5 on the data, and this morning low 9867.5. Yields ended slightly higher yesterday, with tens ending nearly unch’d at 1.518% while the two year rose 2.6 to 1.351%. White and red packs were weakest on the dollar curve, both closing -2.25. Red to green pack spread edged to a new recent low of 1.875. 2/5 treasury spread is already inverted, having closed -0.8 bp yesterday.
–TSLA nearly hit 800 yesterday. I am using the run-up in bitcoin in the last two quarters of 2017 as a template. On July 2, 2017 BTC was around 2500 and by the middle of December hit 20000. In September, TSLA was around 250. By the middle of March should we target 2000?
–Factory Orders today. Upcoming news includes Service ISM tomorrow along with the Treasury Refunding announcement, a Thursday evening Quarles speech on the outlook for the economy, NFP and the Fed’s semi-annual report on Friday.
