U.S. stocks on Monday opened lower despite another pop in Treasury yields as the correlation between equities and fixed income continues to change.
Fed Chairman Jay Powell’s “60 Minutes” interview that aired Sunday evening underscored last week’s message that the FOMC is unlikely to start cutting this quarter.
Odds of a March rate cut sank to 15% this morning.
“Powell wouldn’t have seen (Friday’s jobs numbers) before the FOMC and before his taped interview aired last night … where he indicated that the March meeting is likely too soon to have confidence in starting rate cuts,” Deutsche Bank’s Jim Reid said. “He added that the Fed will likely move at a considerably slower pace than the market expects. To be fair nothing much new here, but the confirmation that he wasn’t going to use the broadcast for a big dovish turnaround has caused 2yr and 10yr treasuries to back up 4-5bps overnight, adding to Friday’s big climb.”
Recently, such a rise in yields has hammered stocks, but equities have shown resilience in the past week or so. BofA’s Michael Hartnett said that only happens in times of deflation or bubbles, though.
Shortly after the start of trading the ISM non-manufacturing index hits. Economists expect the measure of services activity to edge up to 52.