EmailIt was a rough start to the week as the major averages all declined between 1.0% and 2.0% on Monday.
There wasn't anything uncharacteristic about the decline. The catalyst was the eurozone, cyclical sectors paced the retreat, and the volume was just so-so. In brief, it was simply a day of selling.
Given the market's manic behavior of late, today could turn out to be just the opposite. The way things stand now, though, the cash market looks set for a relatively flat start.
Today's trading course could ultimately turn on "Operation Twist," only we are not referring to the Fed's program to hold down long-term rates. Rather, we are referring to the headline twists out of Europe.
The latest twists include Spain selling just over €3 bln in 3-month and 6-month T-bills at much higher yields than the prior auction (not a surprise) on a lower bid-to-cover (somewhat of a surprise). Italy in turn sold two-year debt at 4.712%, which reports indicate was the highest yield since December. The results have weighed on prices in the secondary market.
Separately, the U.S. Treasury will auction $35 bln in 2-year Notes at 1:00 p.m. ET. That auction is expected to see pretty good demand due in no small part to the troubles of the eurozone.
Before then, market participants will have digested the S&P/Case-Shiller Home Price Index for April (Briefing.com consensus -2.5%; prior -2.6%) and the Consumer Confidence report for June (Briefing.com consensus 64.0; prior 64.9). These reports will be released at 9:00 a.m. and 10:00 a.m. ET, respectively.
It will be interesting to see how the confidence number measures up given the stock market volatility, the softening in the labor market, and the beneficial impact of lower gas prices. This number could be a notable market mover if it is better than expected since that would be a bigger surprise at this juncture than a lower-than-expected number.
