Thursday, January 21, 2016 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Just as I stated in my evening blog yesterday, both US and Europe stock indexes opened better this morning, but the surprising factor is that US interest rates opened lower. Nothing significant about the stock markets being better, just starting the day taking a breath. Stocks will continue lower in this very bearish run, still expecting the DJIA to drop 20% at least from the recent highs last year.
Economic news this morning showed Weekly Jobless Claims came in higher than anticipated and hit six month highs. January Philadelphia Fed business index showed the new orders index is improving and shipments, for the first time since September were positive.
ECB's Mario Draghi this morning commenting that inflation is way down the line as he said there is no end to what the ECB will do to improve the outlook. Blowing in the wind - as we have noted recently central banks regardless of what they will or could do are becoming more impotent every day in the context of driving economic growth. Draghi said the bank needs to review its policy stance at its next meeting. The ECB left its key interest rates unchanged, but Draghi hinted the bank will review its stimulus at the March ECB meeting.
At 10:30AM, we see the 10yr at hitting 2.0% and the MBSs still a positive 3BPS from yesterday. As the clock ticks so far this morning the equity market is losing the early morning highs. The stocks have only lost about half of their valuations from what was anticipated. Traders will sell into every attempt to rally, although the technicals are now in oversold levels. In this kind of sentiment swing though technicals take somewhat of a back seat
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