Author: jsc

We are pricing for a pause although the market-based probability of a July rate hike rises to 67% after yesterday’s revised dot plot implied two more hikes.

Markets wait on today’s Fed policy decision at 11am PT followed by Powell’s press conference  at 11:30. We expect the Fed will ‘skip’ a rate hike at this meeting with a hawkish statement and/or press conference as a counterweight to easing financial conditions that would

Widening market breadth beginning in late May removes a key technical concern for the sustainability for the rally. Participation from cyclical sectors and small cap stocks followed a sudden uptick in the US Economic Surprise Index (ESI) beginning on May 25.

Consensus is looking for YoY headline CPI to drop to +4.1% from 4.9% last month and the core rate falling to +5.3% from 5.5%. A headline CPI print of +4.9% or higher is a bearish tail risk scenario given recent sharp declines in food and

US equities are mostly higher after the S&P 500 ended yesterday up more than +20% from its 52-week low in October, meeting the technical definition of a bull market as the index attempts to break above the August high near 4305.

Yesterday, the S&P 600 small cap index (SML) managed to close above the upper end of its March-May range, giving us incremental confidence in the durability of the cyclically-led rally

The probability of a June Fed rate hike increases to 40% after surprise hikes from RBA and BOC.

US equities are mostly higher with the Russell 2000 (RTY) and equal-weight S&P 500 (RSP) outperforming as the disinflation theme continues to gain traction.

Today’s ISM services report fits the disinflation narrative that reemerged in mid-April. Last week’s string of disinflationary May prints point to an intensifying trend that should begin to show up in headline CPI.

The upside in equity markets this week can partially be attributed to a string of disinflationary reports including cooler than expected Eurozone CPI and the large drop in ISM prices paid.