Upcoming Data and Auctions Could Test Markets' Rate Cut Hopes
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Inflation data expected this week could show the Fed still has a long way to go before cutting rates as much as markets expect. This could lead to markets pricing out some of those expected cuts.
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Treasury auctions, especially the 10 and 30-year auctions, will be closely watched after previous rocky auctions recently. Indirect bidder participation levels will be key.
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Technical signals suggest rates on the long end of the curve could march higher, negatively impacting stock valuations. The 30-year Treasury yield broke above a key downtrend.
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If inflation data supports more rate hikes, and auctions push rates up further, it could lead to a stock market correction from overvalued levels back towards the 4000 level on the S&P 500.
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Systematic funds may start becoming sellers if the S&P 500 falls below certain levels, adding further volatility and downward pressure. The index has already broken below its 20-day moving average.