Market Reaction as Previewed
August 6, 2021
Yesterday, we suggested a non-farm payroll print north of +900,000 would likely take the 10-year Treasury to 1.28%-1.30%, lead to a sell-off in the NDX and lead to a sustained rally in cyclical/value sectors, particularly banks. The July payroll add of +943,000 is now producing the conditions we outlined. Ten year yields are at 1.295%, the NDX is down -0.60% and the IVE (S&P 500 Value ETF) is up +0.67% with banks leading. Will the advance in cyclical/value sectors be ‘sustained?’ For us, that depends on the shape of the yield curve in the days/weeks ahead with a 5/30 year yield spread >120bps as the hurdle. The 5/30 year spread currently sits at 117.5bps, and we need to see several days of >120bps before signing off on the sustainability of the move.