Tuesday's Market Minute: Volatility Reprieve

U.S. Treasury yields rose sharply on Monday after a difficult week for stocks and bonds, which on Wednesday sent what many see as a recession signal when the spread between the 2-year and 10-year Treasury yields inverted. The Yield Curve has steepened over the last two sessions and stocks have responded quickly to the upside. Is this a reprieve rally or can we expect stocks to continue to rebound into the historically volatile month of September?

Yields are reversing this morning and may signal that the Yield Curve inversion is back in play, which may be ominous for equities in the near-term. Investors want an ‘All Clear’ signal to jump into stocks, but you should be prepared for more volatility for markets over the next couple of months if not into the end of the year.

The Retail Sector is a perfect example of what is taking place in markets. The sector has diverged between the winners and losers as Walmart Inc WMT, Amazon.com, Inc. AMZN and Target Corporation TGT have done well pivoting to e-commerce. The losers in the space such as Nordstrom, Inc. JWN, Macy’s Inc M and Kohl’s Corporation KSS reflect the importance of execution and headwinds despite solid retail sales data. The old adage of stock picking is in full force and requires some education and insight as not all stocks go up in a rising market. Volatility is here and should be expected to disrupt markets over the next couple of months as headline and corporate news affects equity markets.

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