When the 10-year Treasury note is up noticeably before the stock market opens, it quickly makes one wonder what has gone wrong overnight. The concise answer today is that nothing has gone really wrong. Rather, it seems to be a move predicated on a little concern about what might not go right a few days from now.
This Thursday features a triumvirate of happenings that could hold some market-moving potential. There is the ECB meeting, the election in the UK, and former FBI Director Comey's testimony before the Senate Intelligence Committee, which will press Mr. Comey on his conversations with President Trump pertaining to the FBI's investigation of former National Security Adviser, Michael Flynn.
What's unfolding at the moment is a little risk aversion.
It is fair to call it "little" when taking into account that the S&P 500 futures are down just six points after the cash market has increased 3.4% since May 17. The 10-yr note, meanwhile, is up 11 ticks and its yield has dropped four basis points to 2.15%.
Treasuries are up across the curve, with buying efforts helped along by separate reports suggesting China has said it is prepared to increase its Treasury holdings. With the long end of the curve attracting more buying interest than the front end, though, the curve flattener trade remains in play, which means it remains a drag for the financial sector.
Some expected weakness in the financials when trading begins is another factor weighing on the S&P futures, which are trading 0.3% below fair value.
Oil prices ($47.16, -$0.24, -0.5%) aren't offering any offsetting support. They continue to tail off on worries that the diplomatic rift between a number of Middle Eastern nations and Qatar will undermine OPEC's efforts to curtail production.
The weaker dollar, which is following interest rates lower, is helping to stem some of the selling interest in the dollar-denominated oil market.
Even so, the economic messaging wrapped up in a weakening dollar has cooled off some of the buying enthusiasm for now in the stock market, which, at 17.7x forward 12-month earnings, is trading at a 26% premium to the 10-year average, according to FactSet.
Today's lone economic release is the JOLTS - Job Openings Report for April. It will be released at 10:00 a.m. ET.
In the meantime, the S&P 500 is in store for a little jolt at the open as a little risk aversion is coming into play.