Bonds & Stocks
The rally that has pushed US stocks deeper into a record lost a bit of its luster, with traders bracing for a deluge of earnings and updates on the outlook for interest rates that will likely drive the direction of markets over the next few months. Equities struggled for direction in the run-up to results from five megacaps with a combined market value of more than $10 trillion, which have powered the resurgence in stocks. Just hours before the Federal Reserve decision on Wednesday, the Treasury is expected to announce an increase to its sales of long-term debt — which risks driving up yields and pressuring growth shares. Economic figures from consumer confidence to jobs will also be highly scrutinized.
Economy
Bond traders looking for something to jolt the $27 trillion Treasury market out of its recent rut will probably still be left waiting for answers, even after a busy week packed with a Federal Reserve meeting, the government’s quarterly debt-sale plans and a slew of economic data. US 10-year notes have sagged so far this year and yields have steadily climbed. The declines in Treasuries have all but erased the advances made since last month, when Federal Reserve policymakers signaled an end to the latest cycle of monetary tightening. As investors anxiously await a new catalyst, they’ll likely only get more volatility in the days ahead rather than decisive signals that would have the potential to break bond yields out of their recent range.
World
China Evergrande Group received a liquidation order from a Hong Kong court, setting off a daunting process to carve up the biggest casualty of a property crisis that’s upending the world’s second-largest economy. The ruling on Monday from Hong Kong Judge Linda Chan is the latest twist in a saga that saw Evergrande amass more than $300 billion of liabilities during China’s debt-fueled property boom, before turning into the poster child of a market bust that shows few signs of ending. The builder was valued at just $275 million on Monday before trading in its shares was halted, down more than 99% from its peak.