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Monday Morning Musings

Markets are in rally mode in early trading, following Friday's nice gains and more geopolitical news of another ceasefire in Gaza as well as a request for a cease fire from Pro-Russian separatists in Ukraine.

In earnings news, Priceline (PCLN) beat estimates but offered mixed guidance. Nonetheless the stock is trading higher currently and looks like it could challenge its old highs soon.

In M&A news, Kinder Morgan (NYSE:KMI) got announced a big deal to bring all its spin-outs back under one roof, buying back KMP, KMR, and EPB for a deal valued at roughly $70B. KMP is up roughly 15% on the news.

Asian markets were higher overnight, as are European markets this morning. Gold prices are slightly lower near $1309 while oil prices are up a bit to $98.40.

There has been a big drop in volatility this morning, with the VIX trading more than 10% lower and back down near the 14.0 level. It tested the 17 level several times last week, but never definitively closed above it.

As for the 10-year yield, it broke down to new 1-year lows last week dipping below the 2.40% level. This morning it is slightly higher near 2.43%. I still expect a move higher in the 10-year by year-end, but the timing of rates moving higher has stymied even the best traders out there.

Trading comment: The markets had become pretty oversold, so this bounce should not be surprising. It likely started with some short-covering on Friday and has carried higher today on the geopolitical news. But SPX 1940 is still resistance for now, and we would really have to see the SPX trade back above its 50-day to get excited about more new highs. For now, we think this bounce is just part of the consolidation process and are remaining cautious for the time being.

Disclosure: The author is long KMP.