Uptrend Pauses then Resumes on North Korea Moves

US equity markets remain in a confirmed uptrend despite recent and notable index divergence between the Nasdaq and Dow Industrials in recent weeks. That uptrend is finding confirmation in Q2 results which have provided better than expected earnings and revenue growth in over 65% of the cases thus far.

Reuters Update: #BUSINESS NEWS August 10, 2o17 by Rodrigo Campos

Wall Street stock rally could be derailed by U.S.-North Korea war of words

Given the economic landscape laid out in last week’s releases, there is little to stand in the way of further gains for US equities, unless of course investors receive unexpected news on the geopolitical, interest rate, or earnings fronts.

Reuters Update: #MARKET NEWS August 10, 2017 by Sruthi Shankar

Simmering North Korea tensions knock back Wall Street

In terms of the interest rate landscape, last week investors saw a degree of modest demand for US debt instruments that managed to push yields incrementally lower. The US 10-year closed out the week with a yield of 2.27%, up on the day (+1.75%), but modestly lower on the week having moved 0.3 bps lower. In a sign of shifting investor sentiment regarding the interest rate curve in months ahead, according to the Commodity Futures Trading Commission released on Friday, speculative net longs of 10-years dropped to a three month low. That shift in investor sentiment is in no small part due to the stronger than expected economic data we have received in the form of initial and revised economic data readings over the past month. The US 30-year closed out the week with a daily gain of 0.037% to close at 2.842%. That said, futures pricing on a move by the Fed in September remain subdued while expectations for a move in December are considered likely (62%).

This inflation data for the month was not good. Wall Street was expecting more inflation. Every August we have some reason to run up the alarm—Kenny’s Commentary Reuters

“However, Federal Reserve Bank of New York President William Dudley suggested on Thursday that the central bank was on track to raise interest rates once more as he expects sluggish inflation to rise over the next several months” (Reuters).