Rise and shine everyone.

It’s a quiet Friday. With the news flow lighter, markets have also been drifting higher overnight but are now giving up some of those early gains.

Yesterday’s rally was quite substantial, on higher volume, and took out key levels, including the 50-day MA for the SPX. The SPX is on track for its best weekly performance since last Nov. The rally was also back to old form - tech and cyclicals leading. Sectors showed a clear rotation from defensives to risk-on.

We have the Michigan Sentiment numbers coming out at 10 am and we have housing data before that at 8:30 am. It’s a very light day for earnings.

Policy Updates from the Democrats

Most of these policy updates are geared to the housing market.

• Tax Incentives for Home Construction:

  • Proposal for tax incentives to build homes, focusing on first-time buyers.

  • Aim to construct 3 million new housing units.

• Down Payment Support:

  • Up to $25,000 in down payment assistance for first-time homeowners.

  • Additional support for first-generation homeowners.

  • Assistance for working families who have paid rent on time for two years.

• $40 Billion Housing Fund:

  • Propose a $40 billion fund to help local governments address housing shortages.

  • Expansion of a similar $20 billion fund from the Biden administration.

• Regulation of Corporate Practices:

  • Plan to stop Wall Street investors from bulk-buying and marking up homes.

  • Proposal to ban corporate price-gouging on groceries.

Chart of the Day - BofA’s Flow Show

Credit seems to be out of favor. Outflows are being seen in EM debt and Bank loans (longest streak)

A drop in bond yields has certainly started to help mortgage activity.

Most fund managers think that policy is too restrictive. We last saw spikes like this during 2008 and 2001. Go figure!

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)