
Inside Markets — Disconnect
The S&P 500 (SPX) extended its recent pullback yesterday toward its 200-day moving average and bullish inflection at ~4200.
The S&P 500 (SPX) extended its recent pullback yesterday toward its 200-day moving average and bullish inflection at ~4200.
The $1.9T of additional pandemic-related fiscal spending in the spring of ’21 was unnecessary and reckless given that US manufacturing PMI was at an all-time record high of 59.23 at the time of its proposal in January.
This morning’s release of US core PCE and Eurozone CPI fail to shift an emerging stagflation narrative.
This morning’s release of US core PCE and Eurozone CPI fail to shift an emerging stagflation narrative.
The move in yields has been linked to the Fed’s higher-for-longer message, an extension of the rally in crude prices and increased Treasury supply.
The SPX is down ~7% from its YTD high on July 31 as 10-year Treasury yields have risen from 3.96% to a cycle high of 4.54% yesterday.
Investment Grade, High Yield and Emerging Markets CDX credit spreads continue to widen as a possible sign of emerging credit stress.
Today’s curve steepening takes the 5/10 yield spread to -8bp with technical resistance at -7bp. A break above -7bp would be an incremental positive development for rates markets with an eventual break above +18bp signaling an imminent (weeks away) Fed pivot.
US consumer strength has been a major reason to doubt near-term recession risk all year, but some cracks are beginning to show.
Today’s risk-off trade follows yesterday’s Fed meeting and updated dot plot that removed 50bp of easing expectations in ’24.