Markets Again Under Pressure

Bank fears continue to rattle Wall Street, demonstrating how sensitive the market remains to perceived instability in the sector and the volatility that can result. The latest bank in the spotlight is Deutsche Bank, which saw its credit default swaps—the cost to insure against default in the company's debt—jump sharply today.

A "risk-off" mood prevailed early Friday as shares of banks fell again in overnight trading and investors gravitated toward government bonds. The U.S. 10-year Treasury yield dropped 10 basis points to below 3.3%, the lowest it's been since early September. Keep an eye on yields, which can be a barometer of market participants' worries, as well as the dollar, another so-called "safe haven" asset that moved higher this morning. Gold is also rising.

This morning's bank concerns aside, the market is entering a bit of a lull as far as major earnings and data. There's a firehose of information to absorb after the last two weeks of central bank meetings, banking turmoil, and key data, so a quiet period—if it actually occurs amid the market jitters—can be a good opportunity for investors to gather their wits and understand the data and rate news.

We're seeing the market do that in real time, as stocks and Treasury yields vacillated yesterday in choppy trading. On the one hand, there's optimism that the Federal Reserve is nearing the end of its rate hike cycle. This may be welcomed by equity investors—particularly those focused on growth stocks that got battered last year by higher rates—but declining rate hike expectations could indicate that a serious economic hurdle may also be rapidly approaching, which could lead investors to anticipate tougher times and perhaps gravitate toward cash and "safer" assets.