Rising bond yields weighed on equities Monday morning. The 10-year Treasury yield rose above 2.7 percent for the first time since April 2014. Real estate and utilities shares fell more than 1 percent during the trading day. Consumer staples, consumer discretionary, healthcare and financial shares traded flat or modestly higher. Biotechnology extended its bullish run from last week.
Economic data will be light this week. Personal income, consumer spending and inflation data for December were released on Monday. Personal income beat expectations, while consumer spending missed, but remained at a 6-year high. Core inflation was 0.2 percent, in line with estimates. Consumer confidence for January will be out on Tuesday, December pending home sales on Thursday, and manufacturing PMIs for various nations on Friday. The Federal Reserve will meet this week for Janet Yellen’s last meeting as Fed Chair. Speculators pushed the odds of a March hike to 75 percent on Monday.
While the 10-year Treasury yield hit a new multi-year high today, the 30-year Treasury yield is still below October levels at 2.9 percent. It traded at 3.2 percent in April 2014. The spread between these two narrowed on Monday to 0.24 percent. A year ago, it was 0.6 percent.
Crude oil prices eased on Monday, with West Texas Intermediate crude sliding to $65 and change. The U.S. dollar strengthened on higher interest rates and dovish comments from the European Central Bank. Comments from the ECB as well as Treasury Secretary Steve Mnuchin sent the euro exchange rate sharply higher last week. On Monday, ECB officials pushed back with an anonymous source saying the ECB will taper.
S&P 500 companies grew earnings 12 percent in the fourth quarter, based on reported earnings and estimates of companies yet to report. Energy, materials, financials, technology and utilities all reported faster earnings growth than the index. Lockheed Martin (LMT) beat revenue estimates on Monday and delivered strong guidance. Shares climbed nearly 2 percent in trading. The report also boosted the sector. iShares U.S. Aerospace & Defense (ITA) advanced on the day.
Later this week, we’ll hear from Pfizer (PFE), McDonald’s (MCD), Facebook (FB), Eli Lilly (LLY), Ebay (EBAY), Microsoft (MSFT), AT&T (T), PayPal (PYPL), Boeing (BA), Qualcomm (QCOM), Google (GOOGL), Altria (MO), Amazon (AMZN), Apple (AAPL), Visa (V), DowDuPont (DWDP), Mastercard (MA), Amgen (AMGN), United Parcel Service (UPS), Merck (MRK), Chevron (CVX) and Exxon (XOM).