Inside Markets

Systematic funds should be net-buyers of equities given subtle changes in technical conditions.

Bond prices and stock prices are positively correlated at the moment because inflation remains elevated.

Yesterday’s call for lower yields and curve steepening arrives right on schedule with today’s sharp drop in job openings adding extra pressure on front end yields.

US equities will continue to take direction from bond yields with expectations for downside in 5-year yields to steepen the curve and provide near-term support for equity markets.

Attendance will remain light through Labor Day as we enter a catalyst vacuum over the next week, which we expect to result in trend continuation for equity markets.  

Financials declined ~1.9% yesterday as Fitch warned about potential debt rating downgrades for large US banks.

The S&P 500 (SPX) has slipped to first level technical support in the 4438-4460 range with the index currently sitting on its 50-day moving average of 4447. Next level support sits at 4405 with a sustained break below that level derailing bullish trend dynamics that

The S&P 500 (SPX) posted a second consecutive weekly decline with cyclical sectors underperforming defensive groups by 5.5% last week.

Cooler-than-expected June CPI and PPI from July made disinflation a major part of the consensus narrative.

This morning’s CPI print mostly supports the disinflation theme and keeps the focus on the outlook for the Fed’s hiking cycle.