Market Stalls Amid Conflicting Signals
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JOLTS data came in weaker than expected today, though that shouldn’t have been a surprise following May’s sharp increase. The JOLTS figures continue to track closely with Indeed data, suggesting that last month’s surge in job openings didn’t carry over into June.
Still, the JOLTS data, combined with a strong 7-year Treasury auction, pushed rates lower across the curve, sending the 10-year yield down nearly 8 bps. However, the 10-year remains just above critical support at 4.33%, a level that has held firm for several weeks.
It didn’t stop the dollar index from rising for a fourth consecutive day. The index faces considerable resistance around 99, suggesting we might see a day or two of consolidation ahead. However, the RSI indicates that the DXY likely has further room to climb.
Meanwhile, the divergence between the US 5-year and Japan 5-year rate spread versus USDJPY continues to widen. The rate spread is currently testing key support, raising questions about how much longer USDJPY can sustain its opposing move. The last notable divergence of this magnitude occurred in August of last year.
Another notable divergence is occurring between the 10-year Treasury rate and the 1-year CPI inflation swap—a scenario that’s relatively uncommon historically.
Also notable is the divergence between the S&P 500 and high-yield credit spreads. Interestingly, the HY CDX Index hasn’t confirmed the recent highs in the S&P 500 and has, in fact, been moving in the opposite direction lately.
There are numerous mixed signals in the market right now, with various indicators hovering at critical inflection points. As it stands, nothing appears to be breaking decisively or giving a clear signal—leaving us stuck in a holding pattern. By most accounts, rates should be higher, spreads wider, and stocks lower—yet here we are, with no meaningful moves.
It’s unclear what exactly the market is collectively waiting for at this stage.
– Mike
Terms by ChatGPT
JOLTS (Job Openings and Labor Turnover Survey): A monthly economic indicator reflecting job vacancies, hiring rates, and separation data in the U.S. labor market.
Indeed data: Employment data provided by Indeed.com, offering real-time insights into job postings and labor market trends.
7-year Treasury auction: A U.S. government debt sale, specifically involving bonds that mature in seven years; auction results often influence broader market interest rates.
bps (basis points): A unit equal to 0.01%, commonly used to measure changes in interest rates and yields.
Support/Resistance Levels: Technical analysis terms indicating price levels at which an asset typically finds difficulty moving below (support) or above (resistance).
Dollar Index (DXY): A measure tracking the U.S. dollar’s strength against a basket of foreign currencies.
RSI (Relative Strength Index): A momentum oscillator that measures the speed and magnitude of price movements to determine whether an asset is overbought or oversold.
US 5-year and Japan 5-year rate spread: The difference between U.S. and Japanese government bond yields with five-year maturities, influencing currency exchange rates.
USDJPY: Currency pair representing the U.S. dollar against the Japanese yen.
CPI inflation swap: A financial derivative allowing investors to speculate or hedge against inflation expectations.
HY CDX Index (High-Yield Credit Default Swap Index): A benchmark index tracking the cost of insuring against defaults of high-yield corporate bonds, often indicating investor confidence or stress in credit markets.
High-yield credit spreads: The difference in yields between high-yield (riskier) corporate bonds and safer government bonds, often reflecting investors’ perception of credit risk.
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