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'Dark shadows' — What you need to know in markets on Thursday

Myles Udland
Markets Reporter

The economic calendar is light this week, but Thursday will bring one of the week’s bigger economic events with the weekly report on initial jobless claims.

On the earnings side, things will be considerably more busy, with headline reports coming from Coca-Cola (KO), Dunkin Brands (DNKN), Nvidia (NVDA), Pandora (P), Yelp (YELP), CVS (CVS), and Twitter (TWTR).

‘Dark shadows’

At the Yahoo Finance All Markets Summit on Wednesday, BlackRock (BLK) CEO Larry Fink said he sees “dark shadows” looming over markets.

Fink, the chief executive at the world’s largest asset manager, added that the current state of the world and markets has him feeling a bit “bipolar.”

Throughout his conversation with Yahoo Finance editor-in-chief Andy Serwer, Fink outlined a variety of scenarios he thinks could materialize under the Trump administration.

“I can make a strong case why the 10-year Treasury is going to be below 2%,” Fink said. “And I could make a strong case why the 10-year Treasury is over 4%. If I had to be betting right now, I think there’s a better probability of the 10-year being below 2%.”

All in all, the theme of Fink’s speech was one of being unsettled.

“I’m not relaxed,” Fink said.

And these comments are notable given the market action we saw on Thursday. Which looks a lot like market action we’ve been seeing on what feels like every day now.

The headline stock indexes didn’t do much. Bond yields fell a bit. The US dollar fell. The price of gold was higher.

All of these, roughly, are unwindings of the “Trump Trade” we saw break out after the election when each of Trump’s economic proposals — cutting taxes, spending money on infrastructure, cutting regulations — were seen as uninhibited goods by the market.

But this slight unwind is not really signaling a total lack of confidence from markets in Trump’s plan. And, as we noted on Tuesday, why would it? On balance, the average investment professional looks a bit like the average Trump voter.

Additionally, equity markets are, inherently, places where optimism reigns. Being long stocks is an explicit bet on better days ahead for corporate profitability and, by extension, the US economy.

Of course, this optimism and can quickly turn. And so as we see market headlines and political headlines diverge, no wonder Fink is feeling like he’s being pulled, perhaps, in two separate directions.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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