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Us Yields Rise Before Record $70 Billion Sale

April 24, 2024
minute read

The world's largest bond market faced pressure as Wall Street prepared for another substantial sale of Treasuries, a crucial event that could signal a potential turning point following this year's market downturn.

Ahead of a $70 billion auction of five-year notes, Treasury prices declined. Despite strong demand seen in a significant two-year debt sale the previous day, many traders remain uncertain about the market's capacity to absorb such a large supply, particularly in light of the Federal Reserve's more hawkish signals earlier in the month.

Ian Lyngen and Vail Hartman at BMO Capital Markets expressed cautious optimism about the auction's reception but noted the possibility of some intraday price adjustments to stimulate demand comparable to that seen in the previous auction.

US 10-year yields increased by five basis points to 4.65%, while the S&P 500 halted its two-day rally. Meta Platforms Inc. experienced a decline just ahead of its earnings release, while Tesla Inc. saw an 11% surge following Elon Musk's announcement regarding the launch of more affordable vehicles. The yen also weakened beyond 155 per dollar, raising concerns about potential intervention.

Persistently elevated interest rates, coupled with economic uncertainty and geopolitical tensions, have dampened the appeal of certain low-cost strategies in the stock market.

According to data compiled by Bloomberg Intelligence, investors withdrew approximately $200 million from value-based exchange-traded funds this month. In contrast, growth stocks have attracted over $3 billion in inflows, despite concerns about the market's instability, signaling reduced interest in inexpensive stocks following lackluster performances of value-based products.

On a different note, a JPMorgan Chase & Co. indicator has issued a strong buy signal for US stocks, reaching a level that historically precedes above-average gains.

The bank's US Tactical Positioning Monitor, led by Andrew Tyler, JPMorgan's head of US market intelligence, suggests an "attractive set-up" for the S&P 500. Historical data indicates that the stock index has typically gained around 3% in the subsequent 20 days following a similar change in positioning over four weeks, compared to a roughly 1% gain in other periods.

Katrina Dudley at Franklin Templeton views current valuations as fair, emphasizing the importance for companies to continue delivering earnings growth.

Matt Palazzolo at Bernstein Private Wealth Management highlights the significance of companies' guidance for the remainder of the year. While past performance from January to March provides insights, management's expectations for the rest of the year are crucial for investors to gauge the market's trajectory.

Adan Harris
Managing Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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