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Stocks Steady as Bond Make Big Move

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Stocks Steady as Bond Make Big Move

Stocks in the US started the trading session on the soft side as investors took a defensive poster following the disappointing jobs data. The weaker than expected number pushed treasury yields from 3% down to 2.86% on Monday. The major averages closed on their lows with the Dow losing 1.09%, the S&P 500 Index losing 1.26% and the Nasdaq composite losing 1.47%.
The issue for stock investors now is whether the Fed will continue to taper its bond purchase program when it meets again in January. Some analysts have linked it to arguments that the economy has become dependent on QE and at the first sign of withdrawal, will generate a loss in economic activity.

The jobs data and this uncertainty, means that the market will pay extra close attention to the Fed officials that speak as well as, the economic data released prior to the meeting. Six regional Fed presidents will speak during the week, as will Bernanke. The Fed will also release the Beige Book, ahead of the next FOMC meeting.

Hackers attacked a number of retailers, not just Target. Major retailers other than Target (NYSE:TGT) were the victims of cyber-attacks on customer credit card data during the holiday season. The assaults are in addition to one on Neiman Marcus, which said on Friday that it is looking into the theft of data from customer payment cards. Target’s CEO commented on CNBC that shoppers where initially nervous and volume decline for a short period, but volume has now returned to normal.

Friday’s news that American employers added only 74,000 jobs in December didn’t have much of an effect on the broader stock market, but did shock bond investors. The technical picture for the TLT is now positive as yields decline and prices rise. Interest rate sensitive stocks should continue to perform well if rates continue to drop.

chart-stocks-steady-as-bond-make-big-move.png

The TLT broke out and is poised to test the October highs near 107.70. Momentum is strong with the MACD (moving average convergence divergence) index generating a buy signal were the spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread.

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