An inversion in the yield curve sent the markets south in yesterday’s post-holiday trading session. The trading started out fairly positive in weak volume as investors seemed pleased with the prospect of strong holiday sales. However, the mood turned instantly negative as the yield on short-term bonds outpaced those of the long-term bonds. The inversion of the yield curve rings an alarm for investors to pay attention to the markets and how they can quickly reverse course.
The inversion of the yield curve sent a shiver through Wall Street because the last four U.S. economic recessions have been preceded by just such an inversion.
In addition to the yield curve inverting and then flattening, a decline in the demand for natural gas drove that sector down an impressive 23% in just three days. The energy sector continues to lend volatility to this market and I encourage my readers to carefully plot their course going forward.
A strong consumer confidence number delivered some stability to the markets in today’s early trading as well as some encouraging news from the jobs sector for the employment outlook for 2006. So we remain vigilant as we digest the current news and developments. Please stay tuned to the radio show for daily updates. Details are at my website, http://www.dougfabian.com