Friends
An asteroid is passing the earth today and it’s “name” is 1998 QE2. Yes, that’s right; its “last name” is QE2. You really can’t make this up. Hopefully, there is not a financial asteroid heading our way named QE2 or QE3 or QE-infinity. Anyway, I digress. Stocks got off to a healthy start this morning fueled by decent economic news, especially a better than expected Chicago PMI number. The bulls held onto the gains as long as they could, but by the afternoon, as we have seen most every day this week, the direction changed and stocks began to fall. Some index rebalancing seemed to cause selling to accelerate in the last hour and create a more than 250 point reversal for the day.
By the close, the Dow Jones Industrial Average was down 208 points to finish the day at 15,116. The S&P 500 was down 23 points to close at 1630. Gold was down $26 to trade at $1385 per ounce, while oil was down $1.81 to trade at $91.80 per barrel WTI. We have actually had two down weeks now in a row.
Stocks did edge out gains for May, so it wasn’t exactly, “sell in May and go away,” but the bigger story for May might just be the move in yields. The 10 year Treasury note yield rose from 1.64% to 2.16% during the month. Yes Virginia, bonds prices can go down and interest rates can go up. I know we have seen rates stay at rock bottom levels for what seems like is forever, and we don’t expect short term rates to rise anytime soon, but the disruption in the longer end of the yield curve (10 years and out) is something to keep an eye on. You know we don’t like to make grandiose calls, but this is something different that market participants haven’t had to deal with for quite some time. Let’s see how they handle it.
Have a great weekend.
