Central Bankers Speak and Healthcare Reform Bill Takes a Punch

Stocks are looking to open lower, as premarket trading seems to have a negative sentiment.  Some of the world’s most influential bankers are scheduled to speak today, including Fed Chair Janet Yellen. Investors are hopeful that her tone will continue to spur confidence in the future of the US Economy.  We anticipate she’ll remain committed to her plan of pushing for at least one more interest rate hike in 2017, which would round out the year hitting the goal of four 1/4% hikes. Further, she’ll likely reiterate the Fed’s goal of deducting their balance sheet in 2017 by slowing the reinvestments of 10 Year Treasury Notes and mortgage backed securities. Although the reduction will be passive in their approach, it will still add upward pressure to longer term interest rates. This allows the Fed to hold short term rates steady while they use a reduction of their balance sheet to help slow the rate of inflation in the longer term.

Today will be a slower day for scheduled economic reports, so markets will trade heavily based on the technical picture. With Senate Majority Leader Mitch McConnell pushing for a vote on the healthcare reform bill before people leave for their 4th of July activities, we could see political news create volatility within the markets. Following the nonpartisan Congressional Budget Office’s report yesterday that showed 22 million people would lose healthcare coverage overtime under the people’s bill, the five senators who have been sitting on the fence may be even further away from supporting the change. This would hurt the GOP’s ability to live up to their promise to repeal and replace Obamacare, which could cause stocks to fall. That would help further improve mortgage interest rates.

Bonds are starting to lose steam, making now a great opportunity to secure a rate. However, with bonds remaining above their 200-day moving average, any loses will likely be limited. So, hopefully this down cycle will be brief.