05 Mar A NOMINAL DECLINE
Led by financial and healthcare, equity markets declined the most in a month. Throughout the day many were asking what the possible catalyst is for the decline given positive movement on trade. Some speculated it was the inability of the S & P 500 to definitively broach 2,800. Others stating it was the proverbial “buy on rumor and sell on fact” scenario. While others believe it was the beginning of yet another change in monetary policy assumptions.
Many have argued slowing trade will negatively impact the economy, specifically in the technology arena.
As widely discussed the initial print of fourth quarter GDP was considerably greater than expected. Will a trade deal ensure continued growth?
The February and December 2018 market selloff were the result of stronger than expected growth that upended monetary policy assumptions. Is this occurring yet again?
Treasuries however dropped in yield, the inverse of the expected action if indeed the equity selloff was the result of a change in monetary policy. Could I argue the declining yields were the result of a partial flight to quality? Perhaps given the vast majority of trading activity is dictated by non-dimensional trading models.
What will happen today?
Last night the foreign markets were mixed. London was up 0.26%, Paris down 0.22% and Frankfurt down 0.21%. China was up 0.88%, Japan down 0.44% and Hang Sang up 0.01%.
The Dow should open mixed on trade speculation, tax cuts in China and global political uncertainty. The 10-year is off 4/32 to yield 2.74%.