Contracts on the S&P 500 pointed to a bounce after the underlying gauge closed flat Monday, having erased a gain of as much as 0.8 per cent. Europe's Stoxx 600 equities gauge also posted slight gains, after a surprise increase in German factory reinforced the picture of a resilient euro zone economy.
He expects the S&P 500 to trade in a range, however, for the time being, adding that aside from the inflation question, “there are more challenges down the road on growth and it will be up to companies to show they can maintain earnings.” Ten-year U.S. Treasury yields remained around 3.92 per cent however, unable to sustain last week's run above four per cent, with investors noting the attraction of that yield level for buyers. Retail investors are also piling into Treasuries, snapping up the most six-month T-bills in nearly 30 years at an auction.
“We wanted to take the other side of lower stock prices and more hawkish Fed Fund expectations because only a small change in perceptions would likely pop equities,” said Harvey. “We believe there's more near-term upside.”