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- U.S. equity index futures slightly green
- Euro STOXX 600 index up ~0.3%
- Dollar, crude ~flat; gold, bitcoin rise
- U.S. 10-Year Treasury yield edges up to ~1.93%
Feb 7 – Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
AMID JUNKY ACTION, S&P 500 TURNS TRASHY (0900 EST/1400 GMT)
Action in the riskiest of corporate bonds can potentially provide an important signal for the equity market. Although timing can be blunt, struggling high-yield price action can be a sign of less than buoyant sentiment, ultimately leading to equity market instability.
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Indeed, as a proxy for the high-yield sector, the SPDR Bloomberg Barclays High Yield Bond ETF (JNK.P) had broken below its 200-day moving average (DMA), and been diverging from the S&P 500 (.SPX), when the equity index topped in early January :
Of note, just looking back to early 2020, in the wake of new record highs in stocks, S&P 500 tops of varying degree came in the wake of even minor JNK divergence.
From its early-January peak to its late-January low, the SPX broke below its 200-DMA, and collapsed nearly 10%. In so doing, the benchmark index fell to its lowest level since early-October 2021. The SPX has since reclaimed its 200-DMA and bounced around 4%.
Meanwhile, JNK continues to trade below its 200-DMA, and ended Friday at its lowest level since early-November 2020.
In order to add confidence in the sustainability of the equity market’s bounce, traders may look for the JNK to quickly reverse to the upside in order to confirm any ongoing S&P 500 rally. read more
On the plus-side, the JNK did form a bullish hammer candle on Friday, suggesting it is primed for a turn of some kind. However, it has work to do if it is to get back in-gear with the SPX, and repair its recent chart damage.
(Terence Gabriel)
*****
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Terence Gabriel is a Reuters market analyst. The views expressed are his own
Our Standards: The Thomson Reuters Trust Principles.
Register now for FREE unlimited access to Reuters.comU.S. equity index futures slightly greenEuro STOXX 600 index up ~0.3%Dollar, crude ~flat; gold, bitcoin riseU.S. 10-Year Treasury yield edges up to ~1.93%Feb 7 – Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.comAMID JUNKY ACTION, S&P 500 TURNS TRASHY (0900 EST/1400 GMT)Action in the riskiest of corporate bonds can potentially provide an important signal for the equity market. Although timing can be blunt, struggling high-yield price action can be a sign of less than buoyant sentiment, ultimately leading to equity market instability.Register now for FREE unlimited access to Reuters.comIndeed, as a proxy for the high-yield sector, the SPDR Bloomberg Barclays High Yield Bond ETF (JNK.P) had broken below its 200-day moving average (DMA), and been diverging from the S&P 500 (.SPX), when the equity index topped in early January :SPXJNK02072022Of note, just looking back to early 2020, in the wake of new record highs in stocks, S&P 500 tops of varying degree came in the wake of even minor JNK divergence.From its early-January peak to its late-January low, the SPX broke below its 200-DMA, and collapsed nearly 10%. In so doing, the benchmark index fell to its lowest level since early-October 2021. The SPX has since reclaimed its 200-DMA and bounced around 4%.Meanwhile, JNK continues to trade below its 200-DMA, and ended Friday at its lowest level since early-November 2020.In order to add confidence in the sustainability of the equity market’s bounce, traders may look for the JNK to quickly reverse to the upside in order to confirm any ongoing S&P 500 rally. read more On the plus-side, the JNK did form a bullish hammer candle on Friday, suggesting it is primed for a turn of some kind. However, it has work to do if it is to get back in-gear with the SPX, and repair its recent chart damage.(Terence Gabriel)*****FOR MONDAY’S LIVE MARKETS’ POSTS PRIOR TO 0900 EST/1400 GMT – CLICK HERE: read more Register now for FREE unlimited access to Reuters.comTerence Gabriel is a Reuters market analyst. The views expressed are his ownOur Standards: The Thomson Reuters Trust Principles.