Rates Path of Least Resistance is Clearly Pointing up Today

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Clearly the markets are set to be dominated by developments flowing from Washington but in the early going today that focus has yielded a three quarters point rally in Treasury Bonds. It is also likely that disappointment from yesterday’s housing starts and permits data will be embraced by the trade over the favorable US industrial production and capacity utilization results. In short, sentiment in the marketplace looks to embrace bullish developments and discount bearish developments. With the US economic report slate today virtually empty there will be little distraction from the Washington circus which in turn will turn up the spotlight on US equities. With early significant losses in equities and both Democrats and Republicans in Congress poised to protect their interests from the Trump firestorm there will be significant doubt cast on anything fresh developing on the policy front. Once again political and economic uncertainty in the US serves to channel money toward US Treasuries and not away from US Treasuries. In fact developing weakness in the dollar has probably made US Treasuries even more attractive to foreign investors. The North American session will be fairly quiet for economic data and Fed speakers, and will only feature a weekly private survey on mortgage applications.

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