Thursday thoughts:

  • Declining volume on the NYSE has been higher than advancing volume for the past 5 days.  It isn’t surprising we are seeing a bounce.  The “frustration phase” continues.
  • Right now U.S. Treasury yields remain historically low.  Today in our macro post we discuss how this may change over the coming quarters.  It is amazing when you think about it – the Fed is driving money out of riskless assets like U.S. Treasuries into risk assets with higher returns like corporate debt and equities – yet the Treasury announced a huge increase in the supply of riskless assets they are bring to the market to fund the stimulus.
  • A rise in the 10-year U.S. Treasury yield would be a welcome sign for the financials as it would steepen the yield curve.  Let’s see if the S&P 500 (SPX) Financial sector can bounce a bit from a new relative performance low yesterday – so far they are, so lets see it holds.
  • The Financial and Industrial sectors are universally unloved.  That plus a rise in long-rates sets the stage for a rotational rally.
  • According to Bloomberg, the pace of filing for unemployment benefits slowed again last week, from a revised 3,846,000 to 3,169,000, just about as implied by the 3m consensus. Continuing claims rose from 18,011,000 to 22,647,000. My pal Chris Low at FHN Financial pointed out the 4m increase in continuing claims — a measure of the total number of people receiving benefits — was almost twice the increase the prior week, suggesting states made terrific progress improving the pace of processing the claims backlog. Nevertheless, of the 33.5m people who filed for unemployment benefits since the last week of March, 13.1 million are still waiting for their first checks.
  • Credit is still better than it was in March, but still remains stressed.  As an example, my “bond dude” Brian pointed out to me this morning that Avis raised $500K yesterday at 11.3% Yield-to-Maturity.  It is great that they get to stay in business, but that money isn’t for growth, similar to what we said about the recent $25B Boeing (BA) bond offering.


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