Rally in stocks halted on Tuesday, causing major indices to tumble from record highs amid rising Treasuries. As such, the S&P 500 dropped in value because financial stocks fell due to the decline in the yield on 10-year bonds. Tesla also posted a 12% decline amid a Twitter post by Michael Berry. Meanwhile, General Electric rose after the announcement of the division into three companies.
Global equities have hovered around all-time highs over the past week, thanks to strong earnings, reduced travel restrictions and US infrastructure spending. But concerns on inflation continue to escalate because PPI in the US accelerated in October.
Upcoming data on CPI could also drive decisions on monetary policy. There is also an issue within the central bank as it was reported that Lael Brainard was interviewed by US President Joe Biden regarding the seat of Fed chief. If the power shifts, 30-year bond yields will plunge to its lowest level since July, while the yield on 10-year US bonds will fall to 1.43%
"We are at a point where policies are becoming somewhat less flexible," Morgan Stanley CIO Lisa Shalett said. "We do think that financial conditions will eventually tighten by the middle of next year, and investors don't seem to care. They are tied to very low real interest rates."
Other key events for this week are:
- meeting of the Central Committee of the Chinese Communist Party (until Thursday);
- report on China PPI (Wednesday);
- data on US wholesale inventories, CPI and jobless claims (Wednesday);
- marked US bonds will be closed in observance of Veterans Day (Thursday);
- China singles day (Thursday).
