Reuters Insider - Peter Cardillo doesn't see bond yields going much lower
23/09/2016 20:57
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Source: Thomson Reuters
Description: Peter Cardillo of First Standard Financial tells
Reuters' Fred Katayama he sees a Fed rate hike
soon that will cut short the stock and Treasury
rally.
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Transcript (May be auto-generated)
Stocks edging lower, Friday, after a week of big gains. Let's take a deeper dive
into the markets, go to the floor of the New York Stock Exchange and we're
joined by Peter Cardillo. He's Chief Market Economist at First Standard
Financial. Hello, Peter. What's pulling down stocks this Friday? I think it's a
combination of two factors, really: one, just the post-Fed rally, some
profit-taking on that; and then, of course, you know we have oil prices which
are down rather sharply and they're down because it looks as though Saudi Arabia
and Iran can't seem to reach some sort of an output agreement and of course
that's basically was causing oil prices to come down in anticipation of next
week's OPEC meeting. So, I guess you might say all hopes for some sort of accord
for now look like it's off the table. And we'll be watching that meeting in
Algiers.
The S&P 500, Peter, had its best two-day performance in more than two months on
Thursday. We got the S&P 500 just about a percent shy of its all-time high. Have
stocks gotten ahead of themselves here? I think we're still in for some sort of
a pull back, I believe so, and I think the reason that is because, you know,
there's no question- there's no doubt that we're getting very close to a Fed
hike. And I think, you know, over the next month or two, we have a slew of
economic numbers coming out and if by any chance, we should see the employment
numbers come in real strong and a jump in wage prices then I think that opens
the debate as to whether or not the Fed raises 25 basis points or 50 basis
points in December. And I think that's the real key here. So, you know, I think
we could still see this market fall back.
Let's take a look at bonds. Yields are edging lower near the 1.6% mark today
after five straight sessions of declines. Do you see further downside, Peter?
No, I don't think so. I think that we're probably approaching that lower end
here. The 10-year note probably is not going to get much lower than where it is
now. As I said before, you know, we're going to be very much on data dependent
and again, you know, if the debate should- if a speculative debate should arise
as whether or not the Fed could raise 50 basis points that I think would take a
lot of starch out of the bond market and certainly out of equities. Well, Peter,
earlier, you mentioned the oil producers' meeting in Algiers. What do you see-
what will investors will be looking at next week? Well, next week, we have a
slew of Fed talk- of Fed speakers and then of course, you know, we also have the
OPEC meeting, and we have a lot of macroeconomic news coming out of which, at
the helm, will probably have, you know, consumers confidence and personal income
and personal spending – the three major pieces of economic indicators next
week. So, I think it'll be quite interesting to see if consumers are still
somewhat cheerful and of course the key remains consumer spending and personal
income. And we got that presidential debate too. Alright, Peter, good catching
up with you. My pleasure. Our thanks to Peter Cardillo of First Standard
Financial. I'm Fred Katayama and this is Reuters