Interest rates, auto manufacturers and homebuilders

[squiffy]

Here is a comment from a Standard and Poor's economist

"We still think the Fed is more likely to wait until after the general election to raise rates," said Sam Stovall, senior investment strategist at Standard & Poor's. "But if we get several successive labor reports, retail sales reports and the like that indicate either an increase in economic activity or an increase in inflation concerns, then we might have to change our stance."

Stovall was observing what he said is a "classic rotation" of cash during a period of interest rate risk out of discretionary consumer and industrial categories, such as homebuilding and auto manufacturing, and into sectors like energy, health care and technology. "That is fairly consistent with history," he said.

[adios]

Back in the fall of 2004 S&P was predicting $24 a barrell for oil too. You can find out all the information you need about interest rates following the bond market. The Fed controls the short end of the yield curve 0-2 years, the bond market 2 years and out. Strong retail sales number (good news for the economy IMO) sparked a sell off in treasuries which tanked stocks. Higher longer term rates == lower stock valuations. Watch the inflation data, that's coming out. Market concerns abound about higher commodity prices, strong consummer demand (yesterday's retail sales number confirming), a possible rebounding job market (I think March's number was a signal definitely could be wrong though), and a Fed that prefers inflation risks to deflation risks (they know how to fight inflation) has the market focusing on this data. A rise in inflationary pressures is poison to lenders. Also those companies who thrive off the carry trade should get hammered. Not necessarily correctly but the market usually "shoots first, asks questions later."