The stock market struggled on Friday amid rising Treasury rates, highlighted by the highest closing yield for the 10-yr note (2.95%) since 2014. Treasury rates are still holding some sway this morning, as the ebb and flow of the futures trade has coincided with the ebb and flow of the 10-yr note yield.
In overnight action, the 10-yr note yield traded at 2.965% around 2:00 a.m. ET, which was roughly the same time the S&P futures were up about 10 points. The yield, however, rose steadily to 2.995% by 5:00 a.m ET, and, as it did, the S&P futures traded off and were down about four points shortly before 5:00 a.m. ET. They have since rebounded with the 10-yr yield backing down to 2.965%.
The S&P futures are currently up six points and are trading 0.3% above fair value. The Nasdaq 100 futures are up 25 points and the Dow Jones Industrial Average futures are up 46 points.
Will it be a game of "follow the bouncing interest rate ball?" That's the game that seems to be in play right now as everyone is watching to see if the 10-yr yield can trade above -- and close above -- 3.00%.
The fact that it got beaten back earlier has helped turn sentiment a bit, but so far it hasn't been any kind of Pamplona moment.
The bulls are not charging. Rather, they seem to be meandering, knowing full well that this market is a fickle one -- and perhaps even more so now with a 3.00%+ 10-yr yield in play.
In any event, it has accounted for something this morning that the 10-yr yield still sports a 2-handle. That sight line is providing a measure of support along with upgrades to several Dow components, including Merck (MRK), Caterpillar (CAT), ExxonMobil (XOM), and Verizon (VZ).
There is an ample degree of political news.
North Korea has reportedly said it will stop its nuclear tests and close down a nuclear test site; French president Emmanuel Macron is meeting with President Trump in D.C.; Mexico has talked up the progress of NAFTA negotiations; and Treasury Secretary Mnuchin has suggested he might go to China to discuss trade matters.
These political developments, however, are talking points more than they are trading points.
Hasbro's (HAS) weak earnings report, on the other hand, is both a talking point and a trading point. Shares of HAS are down 4.9% in pre-market action after the toy maker came up well short of first quarter earnings estimates, citing the Toys 'R Us liquidation for its disappointment.
That report is one of the early reports in what is going to be a huge week of earnings reporting. Alphabet (GOOG) is slated to release its results after the close.
It will also be a big week for monetary policy, with the ECB and Bank of Japan both holding meetings, and for economic data.
The Existing Home Sales report for March (Briefing.com consensus 5.57 mln; prior 5.38 mln) kicks things off at 10:00 a.m. ET today and will be followed by the New Home Sales, Consumer Confidence, Durable Goods Orders, and Q1 GDP reports later in the week.
That will all factor into how the stock market trades this week, yet the focal point is going to be the Treasury market, which is also going to be dealing with new issuance for the 2-yr, 5-yr, and 7-yr tenors.