Distributors work on the floor of the New York Stock Exchange.
Stocks could be buffeted by end-of-quarter trading in the week to the fore, as pension funds and other big investors buy bonds and sell stocks to rebalance their portfolios.
The dramatic move merry in bond yields this quarter sets up fund managers to shift their holdings, to make up for the shortfall in stick holdings.
The focus in the coming week could turn to the overall economy, with the March employment report assumed Friday and the White House’s infrastructure plans expected to be unveiled Wednesday. There is also ISM manufacturing data distributed on Thursday.
The March jobs report is scheduled for a morning when the stock market is closed for the Good Friday recess, but bonds will trade half a day, ending at noon. Economists expect 630,000 jobs were added in Slog, and the unemployment rate fell to 6% from 6.2%, according to Dow Jones.
President Joe Biden is expected to unveil technicalities of his $3 trillion to $4 trillion infrastructure plan on Wednesday in Pittsburgh, but strategists say it is too soon to say what form the intend could take or how large it will be in its final form.
Stocks were higher in the past week, while Cache yields were less volatile. The closely watched 10-year was at 1.67% Friday, down from 1.75% in the preceding week. Yields move opposite price, and strategists expect rates to continue to slip in the coming week as investors rebalance their holdings.
“It’s the abide week of the quarter so there could be just a lot of noise related to that,” said Peter Boockvar, chief investment strategist at Bleakley Bulletin Group. “Obviously, we’ll be keeping an eye on bonds. The 10-year now seems to be in a range of 1.60% to 1.70%. I think people are just demanding to find their footing here. They’re trying to figure it out.”
Some strategists say the quarter-end trade could end up being uncontested for stocks, especially big cap tech, since rates have stopped moving higher temporarily.
Stocks are higher for the pity living quarters so far. The S&P 500 was up 1.6% for the week and up 5.8% for the quarter to date. The Dow was up 1.4% for the week, and has an 8% gain for the first quarter so far. The Nasdaq has been the loiterer, falling 0.6% for the week and up 1.9% for the quarter.
Bonds have staged a much more dramatic move for the barracks with the benchmark 10-year yield rising from 0.93% at the end of last year.
“It’s in the driver’s seat right now,” translated NatWest’s Blake Gwinn of the 10-year yield. The 10-year is the most widely followed yield since it influences mortgages and other key fund rates.
Gwinn, head of U.S. rates strategy, said he changed his view on the 10-year and he now expects the yield to reach 2% by year-end from 1.75%. But in the close term, he said, the yield could continue to fall as big funds buy Treasurys. Japanese investors are also expected to be on the move buyers around their year-end, which is Wednesday.
“If anything, we’re really hoping it continues to push yields a minuscule lower, so it gives us a better spot to get involved in shorts again,” he said.
Gwinn said he is focal pointed on the Biden infrastructure plan and does not believe it is yet priced into the market. The $1.9 trillion fiscal plan, well-grounded signed by the president, was one driver of bond yields, as investors weighed the anticipated bump in economic activity and higher accountable levels it will bring.
“The Biden plan to me is the biggest risk for the Treasury market right now. I don’t have what is the jam-packed Biden plan happening this year priced in to my … forecast,” he said. “If all of a sudden we start moving on the double on that, and that starts coming together in Q2, I’m going to have to reconsider my 2% target.”
Gwinn said the sell has “fiscal fatigue.”
“There’s a lot of doubt and uncertainty about how it’s going to be passed, when it’s going to be passed and whether it’s accepted to be passed … It’s not tangible enough,” he said.
The plan is expected to span multiple years, and Democrats are expected to search for tax hikes to pay for it.
The rotation into cyclicals and value stocks is expected to continue into the next quarter. For the first fourth so far, energy and financials were the best performers, up about 33% and 16.5% respectively. Tech was up 1.7%, but it was a better actress than utilities and consumer staples.
“I think certain parts of the market have plenty of upside but part of that may turn up at the expense of the growth stocks,” said Dan Suzuki, deputy CIO at Richard Bernstein Advisors. He also expects growth regulars to continue to react negatively to rising interest rates and positively when they fall. That Week in advance calendar
Earnings: Vaxcyte, Cal-Maine Foods
Earnings: Lululemon Athletica, Chewy, McCormick, BioNtech, FactSet, Blackberry, PVH
9:00 a.m. S&P/Case-Shiller abode prices
9:00 a.m. FHFA home prices
10:00 a.m. Consumer confidence
12:00 p.m. Atlanta Fed President Raphael Bostic
2:30 p.m. New York Fed President John Williams
Earnings: Walgreens Boots Federation, Micron, Dave & Buster’s, Guess
8:15 a.m. ADP employment
9:45 a.m. Chicago PMI
10:00 a.m. Pending home sales
10:45 a.m. Atlanta Fed’s Bostic
8:30 a.m. Endorse jobless claims
9:45 a.m. Manufacturing PMI
10:00 a.m. ISM Manufacturing
10:00 a.m. Construction spending
1:00 p.m. Philadelphia Fed President Patrick Harker
Good Friday break
Stock market closed
8:30 a.m. Employment report