Image Source: Pexels
 

Equity futures are moderately lower this morning with technology leading the way to the downside as markets digest the latest round of tariffs from the President last night. Treasury yields and crude oil are higher, and the only economic report of the day – the NFIB Small Business Optimism survey showed a modest deterioration after the historic post-election surge.

As you probably know by now, this is an important week for interest rates. It starts with today’s Senate testimony by Fed Chair Powell. Then, we’ll get CPI and more Powell testimony at the House tomorrow. Thursday will cap things off with PPI, but there will also be plenty of other Fedspeak sprinkled in between. Maybe all this Fed/inflation news will allow the market to shift some of its attention from the White House!

Heading into today’s Powell testimony, Treasury yields are at an important juncture. The 10-year yield saw a sharp decline from its mid-January peak of 4.8% down below 4.4% but increased in the last few days moving back above 4.5% this morning. As shown in the chart, these levels put the 10-year yield back above its 50-day moving average (DMA) but still below the uptrend line that was broken to the downside last week. It’s common to see a test of a former trend line after it has been broken, and how that test turns out in the short term can often signal the intermediate-term direction going forward. An upside break would potentially signal higher rates going forward while a failed test could indicate a longer downtrend in rate from here.

More By This Author: