US stocks breathed a tentative sigh of relief now that the bond market selloff appears to be taking a break.  In just a few weeks, Wall Street has gone from pricing in a gradual tightening of policy to a hurry-up offense that could deliver 4 to 5 rate hikes this year and a balance sheet reduction kickoff this spring.  Fed tightening expectations have been overdone and investors are now scaling back into risky assets.

US data

Investors quickly shrugged off a rather hot initial jobless claims report that rose to the highest level since October.  Filings for jobless claims increased by 55,000 to 286,000, much higher than the expected forecast of 225,000. Holiday and covid closures were at play and likely impacted the high jobless claims reading.

The hot housing market saw a rare miss with existing home sales as record-low inventories and surging mortgage rates led to a slowdown in purchases.  This is not the top for the housing market as some seasonal factors and Omicron likely weighed on the decline in home sales. For the full-year sales hit 6.12 million, an increase of 8.5% from 2020, which was the best year since 2006.  The housing market is not slowing down just yet; that may happen after a couple of Fed rate hikes.

Bitcoin retreats on Russian threat

Bitcoin shed earlier gains after the Russian central bank proposed a ban over the use and mining of cryptocurrencies on Russian territory, claiming the digital currency poses a risk to the financial stability and monetary policy sovereignty.  The Russian ruble has been steadily declining over the past couple of decades, which made bitcoin an attractive investment for many Russians in recent years.  Russia has been a top-three country for Bitcoin mining, so if this proposal passes, Bitcoin could slide below the USD 40,000 level.

Cryptos remain the perennial risky asset and if Treasury yields continue to decline, that should be good news for bitcoin.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Senior Market Analyst, The Americas at OANDA

With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.

Source: https://www.marketpulse.com/20220120/global-bond-yields-slide-stocks-rebound-us-data-bitcoin-rallies/