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A look at the day ahead in U.S. and global markets

By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets

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Wall St stocks shook off their new year torpor with the best day in almost two months on Monday – as tech fizzed again and disinflation signals mounted even as Boeing’s woes acted as a drag on the blue chip Dow Jones index.

But sustaining the buzz looks tricky as investors face several big hurdles over the remainder of this week alone. And despite the valiant 1.4% rally on Monday, the S&P500 remains marginally negative for the first five trading days of the year – frequently a pointer to its full-year fortunes.

The Wall Street sign is pictured at the New York Stock exchange (NYSE) in the Manhattan borough of New York City, New York, U.S., March 9, 2020. REUTERS/Carlo Allegri

Still acting as a drag, last month’s rate cut euphoria seems absent from the bond market – with 10-year Treasury yields stuck above 4% and even the more dovish Federal Reserve officials pushing back against bets of rate cuts as soon as March. Futures markets are now not fully priced for a first quarter-point cut until May.  

What’s more, some $110 billion of Treasury coupon sales kick off later on Tuesday with a $52 billion 3-year note auction – and 10- and 30-year paper comes up for grabs later in the week.

Even though Congress appears to be making some progress on averting a government shutdown later this month, a recurring election year theme is likely to be how markets absorb new debt sales – with total Federal debt topping $34 trillion for the first time last week.

U.S. Treasury Secretary Janet Yellen said on Monday she believes a top-line federal spending deal reached by congressional leaders over the weekend is consistent with last June’s debt ceiling agreement but could not say whether a government shutdown could be avoided as current funding lapses.

Better news for the Treasury market comes from Fed indications it will look at mapping out when it should slow the pace of its balance sheet rundown, or so-called quantitative tightening policy of shedding bonds from its accounts.

And the disinflation picture continues to be encouraging both in the United States and abroad.

U.S. households’ inflation expectations over the short run fell to the lowest level in nearly three years last month, the New York Fed’s survey showed on Monday.