I saw an article from someone who typically does solid work claiming that the massive sell-off in stocks today was due to rising rates.  Fortunately, the article also quoted pundits saying the notion was essentially preposterous until and unless rates move a whole lot higher than they did today (because those pundits are correct).

Even then, attempts to blame rates for any move of the size seen in stocks today can usually be traced back to a lack of overt causes.  I'll be the first to admit that happens to anyone attempting to explain market movement from time to time.  I have dialogues with other folks who write on markets and it's common for us to say "hey, what about xyz?" if we read each other's commentary and for xyz to turn out to be an enlightening addition to the analysis.  No one can know it all or see every connection every day.  No hard feelings there...

The only issue is that today's move in stocks was fairly clearly linked to developments on the tax reform front.  The topic of 401k contribution limits has been critical.  At first, congress was apparently considering capping contributions as of this weekend.  Then Trump tweeted that 401ks were safe on Monday.  Now today, Rep Brady (Chair of the committee that chiefly handles tax laws) says 401k caps are still on the table, and Trump denied the same in the afternoon.

This is problematic for stocks for one or two reasons, and it doesn't really matter which one deserves more blame for today's purposes.  At face value, anything that jeopardizes the amount of money flowing into 401ks every year also saps a major source of assets under management for portfolio managers.  It would make sense for both stocks and bonds to get hurt by this news (bonds get tons of money from 401k contributions as well), but bonds didn't get hurt by it, so we have to dig deeper past face value.

One approach would be to consider the pace at which stocks lost ground today.  It was fast enough that the money fleeing equities markets would need a place to go, and enough of it wound up in bond markets to help bonds recover.  That's what I focused on in the MBS Huddle video, but I'll add another thought here in the recap.

How about the fact that gridlock between Brady and Trump speaks to tax reform being easier said than done?  That's a pretty simple cause and effect relationship if we're trying to explain a drop in stocks and a rally in bonds.  The timidity of the rally in bonds could then be explained by the fact that 401k money was still on the chopping block.  

On a final note, our chief concern is the bond market, and we can--if we like--simply say that after today's stronger Durable Goods data blasted 10yr yields up above 2.47+%, bonds had seen enough selling pressure for the day.  Indeed, they'd already begun to correct before stocks made their move.  If anything, the stock move helped bonds as opposed to the earlier spike in bond yields scaring stocks.  Most importantly, however, bonds closed at the weakest levels in months, and continue to face down an important European Central Bank announcement tomorrow and a Fed announcement next week.  Stakes are high.