A rise in Treasury yields is the dominant feature in markets today. That’s helped to lift the US dollar for its first gain in a week and is weighing on stocks. The S&P 500 is near a session low, down 18 points to 6832.
There are conflicting signals on deficit priorities in Washington. Trump has said he will use tariffs to pay down the +6% of GDP deficit but has also variously said he would give tariff money to farmers, factories or via $2000 checks to Americans.
On the economic side, the market is 85% priced for a Fed cut on Dec 10 and that dovish shift could be stoking inflation fears further out the curve. Notably, though, 2-year yields are also moving up and are at 3.53%, which isn’t far off from the current Fed funds level of 3.75-4.00%. Lately though, US jobs data has been slipping.
In contrast, US retail sales data has been solid aside from pockets of weakness. Given the lack of US economic data, it’s tough to say where the economy really stands.
For today, the dollar strength has weighed on EUR/USD, which is near a session low and down 20 pips on the day.
This article was written by Adam Button at investinglive.com.