Thursday, April 10, 2014

Greece Returns To Bond Market After Four Year Absence

Markets are trading lower in early trading.  Stocks had enjoyed a 2-day bounce, but some cited the low volume on those up days as evidence of lack of conviction among buyers.

Biotechs and other momentum stocks are once again the weakest.  Most sectors are lower in early trading while defensive consumer staples and utilities buck the early weakness so far.

In corporate news, a couple retailers reported earnings and both stocks are lower.  BBBY lowered Q1 guidance and its stock is down -6%.  FDO missed estimates and also lowered guidance.

Jobless claims came in lower than expected, but that isn't providing any support to bond yields, where buying in Treasuries is pushing the yield on the 10-year Treasury back down to 2.65%.  Bond yields recently looked like they might be embarking on a renewed uptrend, but the last several days has put a question mark on that thesis.

Asian markets were mostly higher overnight.  China's imports and exports both fell by more than expected, but China's Customs Office is trying to downplay the figures saying that Q2 will rebound.  To us this looks like another potential warning sign on the China slowdown.

Europe's markets are mixed this morning.  On an important day, Greece returned to the bond market yesterday for the first time in 4 years.  They raised 3 billion euros in a bond auction being called a "triumph" by govt officials.  The Finance Ministry said that most of the issue was bought by foreign investors.

In many ways, Europe looks to be on the mend from its credit crisis that ended last year.  Confidence is the name of the game, and if folks feel good about sovereign debt in Europe then that is a big boost.  And confidence doesn't seem to be lacking at the moment judging by the low level of bond yields in many peripheral European countries.

Trading comment: The 2-day bounce in stocks felt good but it did come on lower volume which is never a big positive.  Today it feels like we are right back to where we left off on Monday as the selling intensifies.  Many high growth stocks are getting hit hard today, as well as biotechs which are down across the board.  Aside from the S&P 500, the Nasdaq, small- and mid-cap indexes remain below their 50-day averages.  As such, we continue to remain in defensive mode until we see more signs that this correction has run its course.


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