January 21, 2025
Good morning,
After months of selling pressure, the U.S. Treasury market finally rallied last week, with the U.S. Treasury 10-year yield falling 18 basis points from its intra-week high down to 4.63%. The S&P 500 Index ended last week up +2.90%. Along with a good start to earnings season, the decline in yields in the bond market fueled the strong rebound rally in stocks. Both markets (stocks and bonds) were deeply oversold entering last week, which probably accounted for the outsized moves witnessed in both markets.
This week, the economic calendar is light, which means investor focus will be on Q4 earnings reports and more policy announcements from the Trump administration. The early look this morning in premarket trading for stocks and bonds suggests some of the Tariff fear has subsided following yesterday’s wave of executive orders. Futures (S&P) are up +40 bps (+.40%), and bonds are down another -5 bps (.05%). That is a bigger move for bonds than it is for stocks. Another bullish sign coming from markets is stability in U.S./Canadian dollar currency trading. The CAD is up this morning after weeks of weakness on fears of an immediate 25% tariff enactment (it is now scheduled for 2/1, but the read on that says “negotiation,” not “edict”).
Overall, the initial market interpretation of Day One/Term Two is still pro-business. See you Friday.
Be well,
Mike
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