NEW YORK (TheStreet) -- This week marks an important turning point for the U.S. economy and financial markets. Earnings remain in full swing, and due to mixed results, investors have been wary to push equities above all-time highs.
On the economics front, data from the Federal Reserve and labor market take the spotlight. There were reports last week that the Fed is leaning toward a more dovish stance than had been expected. That pushed the U.S. dollar lower and assets responded as if the end of quantitative easing would be delayed.
The Fed convenes this week, and if the reports prove true and monetary policy remains accommodative, risky assets will get bid higher.
Nonfarm payrolls will be released on Friday. That will be a good indicator of whether the economy is truly improving. If the number comes in at an extreme on either end of the spectrum, markets will adjust their rates hike horizon.
This pair has recently spiraled lower off yearly highs and begun a trend lower. That is a bearish signal that will either be confirmed or adjusted after this week's events. Expectations for higher rates will surely push the pair further into a downward trend.
The next chart is of iShares Barclays 1-3 Year Treasury Bond (SHY)over iShares Barclays 20+ Year Treasury Bond (TLT). This pair measures the Treasury yield curve. As the pair moves higher, long-term rates move up faster than short-term rates, thus steepening the curve.The chart shows that the yield curve has continued higher since the beginning of May. Markets are pricing in an end to accommodative policy; the only question that lies ahead is how quickly.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV