Wednesday, July 31, 2013

Bond Yields Rise On Stronger Economic Data

The markets are nicely higher in early trading after a handful of better than expected economic reports as well as some positive reactions to more earnings reports.

In economic news, Q2 GDP grew +1.7%, above estimates of 1.1% growth.  Also, the ADP Employment Report showed the private sector added 200k jobs in July, which was also above expectations.  And the Chicago PMI for July rose to 52.3 from 51.6 last month.

Those strong economic reports led to buying in stocks and selling in bonds.  The Dow was up 100 points earlier, but has faded a bit since.  Bonds are selling off and pushing yields higher.  The 10-year yield is up to 2.68%.  It high from earlier this month was 2.72%.

We also will get to see the Fed's latest policy statement when it is released at 2PM EST today.  While most don't think the language will be changed much, there could be some hints about when the Fed might taper and if they mention lowering the unemployment target or other dovish comments.

Stocks rising on earningsSODA, MA, BUD, BWLD, CMCSA, GRMN, HUM, AGN, HSP, HES, H

Stocks falling on earningsAMGN, AMT, EXC, SO

Asian markets were mixed overnight.  Japan fell by 1.5% after its manuf. PMI slipped to 50.7 from 52.3.  China was up slightly after a govt. entity reaffirmed the 7.5% growth target.

Europe's markets are also mixed.  Eurozone unemployment remained unchanged at 12.1%.  In Germany, retail sales fell -1.5% last month.

Commodities are mixed.  Oil prices are higher near $104.30.  Gold prices are lower to $1309.  Copper prices are higher also.

Despite the rise in stocks today, the volatility index is up 1.2% still near the 13.56 level.  This could be perceived as a yellow flag that the VIX isn't moving lower with stocks up.

Trading comment: We have discussed the fact that with the market merely trading sideways it could lead to another push higher.  Moreover, with month end approaching we could see some window dressing which would also exert upward pressure on stocks.  Both seem to be playing out so far today.  The S&P 500 still needs a few more points to surpass its earlier highs this month, but the Nasdaq has moved into fresh high territory. 

KAM Advisors has long positions in SODA, AMGN


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