Both stocks and bonds are down sharply this morning amid choppy economic data and disappointing results from both Wal-Mart and Cisco, which showed that consumer spending remains weak. Judging by the reaction in bond yields, however, the overall reaction suggests improvement in economic conditions (continued reduction in the pace of firings to the slowest since the fall of 2007), which equates to Fed tapering sooner rather than later.
As of 11:20AM ET, the Dow is off nearly 200 points, while the S&P 500 is off -1.2% to 1,665, stabilizing around its 50-day moving average. Volume is slightly heavier-than-what we’ve seen over the last few weeks, as tech, consumer discretionary, and financials are getting hit the hardest. The 10-year yield touched 2.80% earlier versus 2.71% yesterday.
Areas Of Focus Today:
Taper-On Economic Data – New claims for jobless benefits fell to a near six-year low last week, consumer prices rose broadly in July and homebuilder confidence rose, which could draw the Fed closer to trimming its $85 billion monthly bond-buying program.
Wal-Mart, Cisco Disappoint – Wal-Mart shares fell 3% after the world’s largest retailer cut its full-year earnings view and posted sales that grew less than expected. Cisco tumbled 6.7% a day after the network-equipment maker said it will cut 4,000 jobs, or 5% of its workforce, due to a tough economy.
Oil Markets – Brent oil prices rose towards $111 per barrel on fears that escalating violence in Egypt could affect the Suez Canal or spread in the Middle East. The death toll from nationwide political violence climbed to 525, Egypt’s health ministry said.