Quiet Morning in Both Stocks and Bonds

It has been a quiet morning thus far in both stocks and bonds. Weekly jobless claims were better than thought and the four week average also now has dropped with these better figures. The February Philadelphia Fed business index was still a negative number even though it was better than January’s report.  Better claims, softer Philly Fed countered each other with no noticeable markets reactions to the two reports.

Crude oil is continuing to increase, up $0.77 at 9:00 to $31.43. Talks between OPEC, Iran, Russia and Iraq continue although no freeze in output has been achieved yet. Iraq saying it would curb production of oil to prop up sagging prices, saying negotiations are still ongoing between members of the Organization of the Petroleum Exporting Countries.  Even if there is no agreement crude oil has likely seen its lowest prices and it will not return to the $20.00 levels. One oil trader this morning pointed out that traders are increasingly reluctant to sell oil and are preparing not to lose out on the move to $40.00 that is becoming the talk from the trading pits.

Negative interest rates in Japan may be backfiring on the government. Recent indications are Japanese consumers are becoming more sanguine seeing negative rates as increasing fears of a worsening economy. Consumers are cutting back on spending, just the opposite of what Japan’s government expected.

Are global consumers losing faith with central banks? Since 2008 central banks have been sources of salvation in the aftermath of the financial collapse. Recently though central banks have not had much success with stimuli, negative rates or most other attempts to turn the tide of global decline and plans to increase the level of inflation globally.

Currently at 10:00AM, we have the 10yr Treasury moving downward to 1.79% and a positive number for MBSs at 17BPS.

I do not believe the retreat in stocks and bonds is over yet, as I do continue to expect lower stock prices and lower interest rates but as I have been saying, the path will be bumpy and volatile. Technically all of the momentum measurements are losing ground presently. Mortgage rates still very attractive, buyers should take these levels. Betting on the future in this very unsettled environment is very risky. Attempting to get the lows usually does not always work out too well.