And we’re back. In America, Happy National Hangover Day. Investors will look to see if rates continue to rise. On the economic front, we have a quiet week with Crude Oil inventories.
Interest Rate arising: Last week saw the benchmark 10 Year yield rise to 2.85%, the highest level in 4 years. With the sell-off in Treasuries, interest rates continued to rise as investors expect inflation to rise as the economy gets better. So now companies would have to spend more to borrow money which pushed the broader markets to have its worst week in 2 years. If interest rates continue to rise, we could continue to see a pullback in the broader markets. The further the slide, we have the potential for the Fed to intervene and announce some more QE Infinity (which they would deny, but who are they kidding?)
Another Potential Shutdown, Take 4: After briefly shutting down the government for the weekend 3 weeks ago (which nobody seemed to notice), investors will yet again be watching the latest on the potential government shutdown. The deadline for the government budget, which has already been kicked down the road 3 times, is set for February 8th. The closer we get to a potential shutdown, we could see volatility enter. We will also see investors buy Treasuries as that is what they did in the last government shutdown a few years back, a reversal of last week’s trend.
Another Super Thursday for Bank of England: The Bank of England is scheduled on Thursday (2/8) to publish its policy decision, Inflation Report, Official votes and new forecasts or as they call it, Super Thursday (cause their Super, thanks for asking). The Bank of England Governor will also give us his latest outlook as to how the negotiations are going with Brexit. Comments around the negotiations could potentially strengthen or weaken the British Sterling.
Manufacturing PMI: PMI readings from across the globe are also due out this week. Traders will watch these readings as potential weak readings could cause central banks to take further steps to stimulate their respective nation’s economies.
Earnings: Earnings are roughly halfway through and we have another 93 S&P 500 companies scheduled to report this week. Traders will continue to see individual stocks have huge price swings if a company’s earnings outpaces or fall short of what the street expected. According to Thomson Reuters I/B/E/S, we have now seen 50% of S&P 500 companies report 4th quarter earnings so far. Of them, 80% reported revenue above expectations while 78% have reported earnings above expectations. This week has some heavy hitters including Disney.