Stocks rose as the dollar weakened to the lowest level in almost a year on lowered expectations of higher interest rates. Gold rallied and is now at the highest level since January 2015. Oil fell after a 20% surge in April and 76% gain since mid-February. Treasuries fell in price as manufacturing prices are suggesting a rise in inflationary pressures.
In many regards yesterday was not a typical trading day. All know the correlation between oil and crude thus suggesting equities should have been lower. Conversely all also know the correlation between the dollar and commodities….lower dollar higher commodity prices. The dollar fell so did oil.
And then there were Treasuries. A more benign interest rate forecast should have been Treasury positive. It was not.
Yesterday’s equity leaders were primarily the value candidates, names that include energy and financials.
As noted yesterday, this could be a pivotal week regarding the nascent equity transition from momentum growth to value. The lack of correlated trades is offering evidence the transition may be commencing given the breakdown of these will known trading relationships thus suggesting the influence of HFTs and perhaps ETFs may be waning.
Will the trend continue today?
Last night the foreign markets were down. London was down 1.13%, Paris down 1.57% and Frankfurt down 1.70%. China was up 1.85%, Japan down 3.11% and Hang Sang down 1.85%.
The Dow should open moderately lower on a large financial earnings disappointment. Halfway through the profit season, 77% of companies have exceeded earnings forecasts while 57% exceeded revenue outlook. For the quarter results are expected to decline about 8.2%. The dollar is lower again today as is oil. Gold is higher. The 10-year is up 17/32 to yield 1.82%.