Daily Market Color

Equities Rally Ahead of Earnings-Heavy Week

2y UST yield touches above 5% while equities rebound. Swap rates and UST yields held within a tight range during today’s trading session, with a lone highlight that the 2y UST yield briefly crossed the 5% psychological threshold in overnight trading before grinding lower to 4.97% at the close. Nearly 180 S&P 500 companies will report earnings this week, where the Magnificent Seven’s projected profit jumps are expected to lead a broader rally. Among major US equity indices, the NASDAQ rose 1.11% while the S&P 500 climbed 0.87%.

Bank of France Governor says that oil price uncertainty won’t affect June’s projected rate cut. The ECB is on track for its first rate cut since its most recent hike in September, as futures currently suggest a ~88% chance of a 25bp cut in June. Bank of France Governor and ECB official Francois Villeroy de Galhau added fuel to the fire after he said that the ECB should cut rates; when asked if oil uncertainty could force a delay, he responded, “no- unless there is a surprise, we must not wait too much.” He maintained that monetary easing is appropriate if the ECB is confident in their 2% inflation objective, though he caveated that “we will always have the capacity to adapt this if an external shock threatened disinflation.”

US approves Ukraine aid package. On Saturday, the US Congress approved a ~$60B aid package for Ukraine, which had been stalled for six months. The funding comes at a critical moment in the conflict, with Russia gaining momentum while Ukrainian soldiers run out of ammunition and supplies. CIA Director Bill Burns said last week that without fresh US aid, Ukraine could lose by the end of 2024. Ukrainian President Zelenskiy said he was “grateful” to Congress and “personally Speaker Mike Johnson for the decision that keeps history on the right track.” 

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