EmailThe stock market is indicated to open lower as the knee-jerk reaction to the Trump-Xi tariff ceasefire has died down. What's picking up today, however, is the interest in the Treasury market due to some inversion across the yield curve.
The inversion has been seen among shorter-dated securities. The 3-yr note yield of 2.84% has pushed above the 5-yr note yield of 2.83%, which is comparable to the 2-yr note yield. The spread between the 2-yr note yield and the 10-yr note yield, meanwhile, is just 14 basis points, which is the narrowest since 2007.
This is a talking-point issue for the talking heads, who will refer to it as potential signal that a period of slower growth, if not a recession, lays ahead.
That connection is certainly debatable, yet the curve flattening/inversion has been a factor this morning that has helped cool down the recent buying interest that has seen the S&P 500 surge 6.0% over the last six sessions.
Currently, the S&P futures are down 5 points and are trading 0.2% below fair value. The Nasdaq 100 futures are down 17 points and are trading 0.3% below fair value. The Dow Jones Industrial Average futures are down 70 points and are trading 0.3% below fair value.
Other factors contributing to the cautious-minded positioning ahead of today's open include:
- Festering concerns that the U.S. and China won't settle their differences over major trading issues in the next 90 days.
- A fiscal third quarter revenue warning from Apple (AAPL) supplier Cirrus Logic (CRUS), which was tied to weakness in the smartphone market and which fits in the stable of recent warnings from other Apple suppliers.
- On a related note, HSBC Securities downgraded Apple to Hold from Buy
- An acknowledgment from home builder Toll Brothers (TOL) that it saw a moderation in demand in its fiscal fourth quarter ended October 31 and that it saw the market soften further in November.
- A FY19 profit warning from Dollar General (DG)
- A sense the market has moved too far, too fast, and is due for some consolidation.
It isn't all cautious-minded ahead of the open. For instance, shares of auto parts retailer AutoZone (AZO) are up 3.7% after the company blew past consensus fiscal first quarter earnings estimates, and shares of home furnishings retailer RH (RH) are indicated 19% higher after the company did the same and raised its full-year guidance.
