US Treasury yields for 2, 10, and 30 years were all trading higher on August 1 as investors brace for more earnings reports and economic data.
US Treasury yields advanced on Monday to begin August as investors continue to take cues for an economic recession.
Early Monday, the benchmark 10-year Treasury and the 30-year Treasury bond were up 2.658% and 3.02%, respectively. In addition, the 2-year US Treasury yield was trading just above 2.9%, implying an inverted curve of the 2-year/10-year yield. Usually, this development is often interpreted as a sign of impending recession, as yields move inversely to prices.
Markets on the Mend amid Latest US Treasury Yields Development
Meanwhile, the market is coming off its best month since 2020 as longer-term interest rates moderated slightly. In addition, investors also found relief in a much-needed rally after months of increasingly gloomy forecasts and price movements. Although there were several encouraging corporate earnings amid several quarterly results, stock futures began August in a plunge.
For instance, the Dow Jones Industrial Average futures traded 22 points lower, or 0.1%, while S&P 500 futures traded down 0.2%. In addition, futures tied to the Nasdaq 100 were trading 0.2% lower.
All the major indexes capped off the best month so far on Friday by posting cumulative winning figures. For instance, the Dow grew by 6.7% in July, while the S&P 500 gained 9.1%. In addition, the Nasdaq Composite also rose by a substantial 12.4%, a testament to an increase in investor appetite for tech stocks during the month.
Commenting on the market’s July rally, Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, noted:
“We are seeing a relief rally in the stock market, as pessimism reached extreme levels, and as longer-term interest rates have been coming back down.”
Zaccarelli also predicted the near future of stock prices and the possibility of a recession:
“We believe the rally will last until later in the summer, but as stock prices rebound and it becomes increasingly clear that we are headed for a more typical recession (e.g. one with higher unemployment and nominal GDP dropping close to zero or negative), markets will again have another selloff.”
Despite his seemingly gloomy projections, Zaccarelli advises that investors make the most of the present rally. According to him, the rally is “catching a lot of people off guard.”
What Lies Ahead
As investors expect key earnings reports and economic data this week, July’s manufacturing PMI (purchasing managers’ index) takes center stage today. In addition, the earnings report of notable companies such as Activision Blizzard, Devon Energy, Loews, to name a few, are also due Monday. Meanwhile, later this week, the likes of Uber, Caterpillar, Starbucks, Eli Lilly, Amgen, and others also have scheduled earnings reports.
Rounding off this Friday is the much-anticipated crucial nonfarm payrolls report from the Bureau of Labor Statistics. This report is highly important because it provides more insight into the US’ strong labor market.
So far in 2022, economists opine that the US economy is not in immediate danger of falling into a recession. They believe this is so due to the strong job growth, even though the last two quarters saw negative GDP.
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