The stock market story is once again about the rates market.
This past week, the major stock market indexes finished little-changed while the 10-year Treasury yield climbed north of 3.10% for the first time since 2011.
Following Tuesday’s retail sales report, the 10-year yield moved to new highs before settling at 3.06% to end the week despite a lack of major economic catalysts over the final three trading days of the week.
“The lack of a trigger and the lack of a credible story for such a wild ride in rates is worrying,” said Torsten Sløk, chief international economist at Deutsche Bank. “If the market doesn’t have a narrative, then it means that the market doesn’t know what the implications are.”
In the week ahead, investors looking at the economic calendar will likely continue to be lacking for a narrative, with the minutes from the Federal Reserve’s most recent policy meeting set for release Wednesday afternoon serving as the only major highlight.
Elsewhere, readings on home prices, regional manufacturing surveys, and durable goods orders will fill out the economic calendar.
And on the earnings schedule, things will be retail-heavy with results from Kohl’s (KSS), TJ Maxx parent company TJX (TJX), Lowe’s (LOW), Tiffany (TIF), Target (TGT), L Brands (LB), Best Buy (BBY), Ross Stores (ROST), The Gap (GPS), and Foot Locker (FL) all set to report results. And out of the tech sector we’ll see results from Intuit (INTU), NetApp (NTAP), and Hewlett Packard Enterprise (HPE) in the week ahead.
“Looking ahead, the fact that Treasury markets now can move quickly on no news is telling us that the simmering fears of US fiscal sustainability, fears of the US economy overheating, and fears of higher currency hedging costs for foreigners are coming to the surface,” Sløk added.
“Because in most of my client conversations investors agree that long rates gapping higher is the biggest risk to this expansion. And what we learned this week is that it is no longer enough to just watch core PCE, Average Hourly Earnings, and Treasury auctions. Now we also need to worry about rates suddenly moving higher without any trigger.”
- Monday: Chicago Fed national activity index, April (0.1 previously)
- Tuesday: Richmond Fed manufacturing Index, May (8 expected; -3 previously)
- Wednesday: Markit flash manufacturing PMI, May (56.5 expected; 56.5 previously); Markit flash Services PMI, May (54.8 expected; 54.6 previously); New home sales, April (-2.3% expected; +4% previously); Federal Reserve meeting minutes released
- Thursday: Initial jobless claims (220,000 expected; 222,000 previously); FHFA home price index, March (0.6% previously); Existing home sales, April (-0.9% expected; +1.1% previously); Kansas City Fed manufacturing activity, May (23 expected; 26 previously)
- Friday: Durable goods orders, April (-1.4% expected; +2.6% previously)
Trump’s Amazon fights
President Donald Trump’s battle with Amazon (AMZN) and its CEO Jeff Bezos is not going away anytime soon.
On Friday, The Washington Post reported that Trump has personally asked the U.S. postmaster general to double the rates charged by the USPS to companies like Amazon to ship packages. Megan Brennan, the U.S. postmaster general, has explained to Trump on more than one occasion that these rates can’t be increased just because he wants Amazon to pay more, according to The Post.
But this crusade by Trump against Amazon isn’t really about shipping rates so much as it is about Jeff Bezos, who not only runs Amazon but personally owns The Washington Post.
And no one gets under Trump’s skin more than Bezos.
Because as Trump continues to push for policy changes that settle scores, whether it’s between the U.S. and China or Trump and Bezos, the divide between the winners and losers as a result of these moves grows larger.
Yahoo Finance’s Rick Newman has written previously about how Trump’s trade policies ultimately result in the president picking winners and losers. And whether it’s increasing the cost of imported goods or increasing the costs of stuff purchased online, a clear loser in these fights are consumers. And voters have noticed.
Trump’s ongoing crusade against Amazon and Jeff Bezos also shows that when the president gets hold of an issue, he doesn’t let it go until he can take credit for a win or blame someone else for the failure. Tax reform was Trump’s win; repealing and replacing Obamacare was Congress’ failure.
And a “win” on shipping rates for Trump would almost certainly be a negative for consumers. In fact, it sort of already has been. Last month, Amazon said it would increase the cost of its Prime membership by $20 per year, a move that some analysts had earlier said could help the company offset any increases in shipping costs the company could face in the coming years.
And a sweeping change in the Postal Service’s agreements with Amazon and other online sellers that increases shipping costs would almost certainly have effects across the complicated supply chain that gets items from browser windows to doorsteps.
So when it comes to the Postal Service and its relationship with the online retail business, Trump has already laid the groundwork for hurting consumers by claiming Amazon has been running a “scam” in using the USPS to ship packages.
And with Trump having already left consumers behind when it comes to economic policy, it would appear unlikely that the president stops railing against Amazon until he gets results. Which likely means Trump won’t stop trashing Amazon until they pay the USPS more to ship packages — and consumers pay more for whatever is in those boxes.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland