From MarketWatch’s “U.S. stock futures wilt before Thanksgiving as financial conditions tighten” posted early Wednesday:
U.S. stock futures headed lower Wednesday, ahead of a massive slate of economic data in the run-up to the Thanksgiving holiday.
One of the stories of the last few days has been the rise in real, or inflation-adjusted, yields. The 10-year yield on Treasury-inflated-protected securities closed above -1% for the first time in three weeks. That comes as Europe battles a wave of coronavirus cases, and as the market took a hawkish interpretation to the renomination of Jerome Powell to chair the Fed.
“I suspect they’ll stay negative for the rest of my career so while higher real yields are likely, I suspect that this is a trade rather than a structural long-term journey given likely long-term financial repression,” said Jim Reid, head of thematic research at Deutsche Bank.
The economics slate includes the second estimate of third-quarter GDP, weekly jobless claims, personal income, consumer spending, PCE price index, consumer sentiment and durable-goods orders. On top of that, there’s the release of the Federal Open Market Committee minutes from November, when the Fed decided to taper its bond purchases.
Michael Kramer of Mott Capital Management said in a blog post that he expects the Fed minutes to show the option of a faster taper being discussed in December — giving the market a few weeks “to break Powell into submission and not taper faster.”
“It may not seem evident when looking at the broader averages, but in the bond ETFs, the dollar index , and the Treasury market, you see massive shifts taking place. All of this is pointing to tightening financial conditions, which are not favorable for stocks,” added Kramer.
Charts: Yahoo!Finance still sees bullish momentum. Max pain this morning is $155 with puts and calls both peaking at $160.
UPDATE: By 7 a.m. Eastern Max pain had moved to $157.50 and Call Mountain had crawled to $165.