Insights

Today’s data mostly supports the ‘higher-for-longer’ narrative as a hotter core CPI print has Fed officials adding qualifying remarks on

The market narrative leading into last Friday’s Jobs Report was centered around disinflationary rate cuts and eventual pro-cyclical equity leadership.

The disappointing NDRC press conference helps pause the post-payroll backup in bond yields, which allows high multiple stocks to recover.

Keep an eye on bond market volatility spillover into equity markets, as VIX levels above 22 are usually associated with

The September payroll print of +254,000 was tail-risk event (~4 standard deviations) with somewhat bullish implications for equities.

Consensus is looking for non-farm payrolls of +140,000 after a similar print last month generated SPX downside of ~1.75%.

Equity markets have entered a challenging three-week window for fund flows with a supply/demand mismatch that’s skewed to the downside.

Bullish overnight headlines fail to drive the SPX meaningfully higher due to overbought technical conditions and overhead resistance in the

The September Jobs Report on Friday 10/4 is the next major scheduled macro catalyst for markets.

The yield curve steepening over the last few sessions has decoupled from levels implied by terminal Fed rate expectations.

Following last week’s 50 bp rate cut, the focus shift to growth/employment data.

With the Fed’s September policy decision now out of the way, we look for longer duration bond prices to spend

The Fed policy statement indicated that 50bp rate cut was motivated by improving inflation and evolving risks to employment and

The rotation into cyclical/value and small cap stocks started on Friday after former Fed officials and the WSJ’s Nick Timiraos

Fed anticipation is driving an ongoing rotation into the cyclical/value sector.

Yesterday’s strong Tech rally followed comments from NVDA CEO Jensen Huang who discussed a trend toward densification and data center

We keep a cautious near-term bias into a rolling corporate buyback blackout window that starts Monday and into a seasonally

ORCL’s earnings call may temporarily shift the AI narrative away from the recent ROI focus and back to large scale

The yield curve steepening that’s occurred over the last two months has mostly been driven by lower short-end rates.

The SPX closed below its 50-day moving average yesterday with today’s jobs-induced pullback resulting in CTA de-grossing.

The S&P 500 (SPX) is currently trading below its 50-day moving average at 5506 that CTAs often use as buy/sell

Yen strength in yesterday’s session drove concerns for a carry trade aftershock.

Today’s risk-off tone started with falling commodity prices in response to disappointing China manufacturing PMI.

Our bullish pain trade scenario will end as the corporate buyback window begins to close in mid-September.

It’s worth noting that NVDA shares may be ‘under-owned’ by the time of its earnings report relative to recent history.

Aggregate Tech positioning is now mildly underweight going into NVDA’s earnings report tomorrow afternoon, DELL earnings/guidance Thursday afternoon and AVGO

The Fed’s concern is focused on labor market conditions and is nearly one-sided.

Position squaring into Powell’s Jackson Hole address accounts for today’s price action as there is some concern his overall message

The last two weeks of August are characterized by low attendance, light volume and thin liquidity.

Attendance is light and volumes are low with yesterday’s late session rally (~35% of the advance came in the last

Inflation has been easing with headline numbers near +2.5% and likely on the way to +2% given favorable base effects

Wednesday’s inline CPI report and yesterday’s improved retail sales number combined to temporarily reestablish the Goldilocks narrative that died in

The SPX managed to close just above the post-payroll downside gap at 5447 yesterday with today’s improved retail-sales report and

Equity markets started pricing for an increased probability of recession after a large drop in ISM manufacturing and big increase

The SPX has already recovered all losses from last Monday’s yen-induced sell-off but remains below the post-payrolls downside gap at

The SPX keeps a bearish bias at levels below 5447, with investors demanding a higher risk premium following last Monday’s

The upcoming catalyst-heavy week will include a number of reports including CPI, PPI, trade prices, retail sales and jobless claims.

The SPX has already experienced a functional correction of -8.5% and is now rebounding off short-term oversold levels.

A corrective phase based on concerns around weakening economic growth may only last 1-2 months if the slowdown is deemed

US equities are higher in a relatively tentative rebound on reassuring Fed/BOJ comments and better-than-feared overnight earnings.

The VIX Index spiked above 65 this morning but has since pulled back to ~36.

Curve flattening changes the outlook as the preference to own cyclical/value over secular growth stocks (Tech) was driven by rapid

Last week, we called your attention to the NDX and Philadelphia Semiconductor Index (SOX) breaking intermediate-term technical support levels.

A very busy week ahead is likely to inform the equity narrative for the next two months.

The NDX reached short-term oversold status earlier this week with yesterday’s late-session sell-off showing signs of decelerating momentum.

The Russell 2000 (RTY) continues to be the strongest major US index as rising expectations for Fed rate cuts drives

This week’s slate of macro reports and ramp in Q2 earnings season was expected to provide incremental direction for equity

The first week of earnings season is always dominated by results from banks and Financials.

Last week, the SPX triggered a short-term sell signal near 5670, which happens to be the upper end of its

The rotation into cyclical/value and Russell 2000 (RTY) doesn’t yet look exhausted.

Yesterday was the fourth straight session of outsized gains for the RTY largely driven by short-covering.

The RTY is extending gains beyond range resistance at ~2140 as today’s better-than-feared retail sales report keeps the soft-landing narrative

The Russell 2000 (RTY) is up +6.4% (intraday) since Thursday’s dovish CPI print vs. down 0.4% for the S&P 500

The rotation into cyclical equity groups continues for a second day with the Russell 2000 (RTY) trading just above long-term

While it’s not our expectation, it is important to recognize that upcoming catalysts have the potential to broaden out the

Consensus is looking for headline June CPI to rise 0.1% taking the YoY rate to +3.1%, which was last seen

Last week’s macro data saw the prevailing market narrative shift from Goldilocks to soft landing.

An apparent loss in US economic growth momentum is taking bond yields lower and driving further rotation into defensive secular

The US Economic Surprise Index (ESI) has dropped to -47.5 after today’s data. The US economy is clearly showing signs

Equity market pullbacks amid subdued realized volatility (VIX

We expect the Fed will cut rates later this quarter in response to slowing growth rather than for ‘policy normalization’

The SPX keeps its bullish bias above 5375 and needs to break below 5230 to signal a potential reversal in

Quarter-end pension fund rebalancing officially ends tomorrow, but the dynamic was largely played out by Tuesday’s close.

The SPX is consolidating recent gains after moving into a cluster of technical resistance levels between 5415-5490.

Market breadth improved over the last three sessions as concentration issues are usually addressed during month/quarter-end pension fund rebalancing efforts.

Quarter-end pension fund rebalancing began late last week and should continue for the next 2/3 days.

The SPX keeps its bullish trend at levels above ~5290 and realized volatility remains supportive-for now.

US equities are mixed and off best levels with the S&P 500 (SPX) attempting its 32nd record close for the

Weekly jobless claims are the highest frequency labor data we have.

Market internals have notably deteriorated over the last few months.

Yesterday’s risk-on rally and all-time high (ATH) in the SPX and NDX followed a Goldilocks ISM services print (improved headline

The SPX and NDX are threatening new highs as bond yields break below moving average support.

The US equity narrative may be starting to evolve with increased concern for the growth outlook.

The prevailing narrative has shifted from Goldilocks (resilient growth, lower inflation, rate cuts) to ‘soft landing’ (slow growth, lower inflation,

A pullback scenario in the 4-5% range is a normal occurrence (~3x/year) in equity markets, while corrections in the 10-15%

Pressure on equity markets from rising bond yields continue, but is unlikely to generate significant downside unless/until 10-year yields break

We turn incrementally cautious as market leadership narrows amid rising bond yields.

The SPX is short-term overbought and should make its way to oversold status within two weeks by our estimates.

This afternoon’s NVDA report is a major catalyst for equity markets given the dominance of AI in the bullish narrative.

We keep a near-term bullish tactical outlook on the SPX at levels north of 5060 with an upside price objective

The SPX is now overbought with signs that higher prices are driving performance anxiety as sidelined investors are forced into

The CBOE Volatility Index (VIX) returns to YTD lows near 12, which should keep the momentum trade intact for the

A sharp decline in the US Economic Surprise Index challenges the benign macro environment that gave us low volatility and

The SPX is on track to make a new high above 5254, with the next price objective at 5415.

The SPX currently sits ~60bps below the all-time high of 5254 made on March 28 when 10-year Treasury yields were

Consensus is looking for headline CPI to rise +0.4% MoM and 3.4% YoY with core CPI expected to rise +0.3%

US equities finished higher with the S&P 500 (SPX) on pace for a third-straight weekly gain after three-straight weekly declines.

A catalyst vacuum until next Tuesday/Wednesday should mean trend continuation (biased higher) for the SPX, but the index will likely

US equities are mostly higher after a quiet session yesterday ended with all three major indices advancing more than 1%.

The SPX is currently trading above near-term resistance at ~5130 with a better close, effectively removing CTA selling pressure from

Last week, we called your attention to the all-time high in 10-year real yields at +228bp.  Positive real yields restrict activity

The more dovish paraphrased takeaways from yesterday’s Fed policy statement: 1) committee finds little signal from the Q1 inflation uptick

Equity markets have remained relatively resilient despite higher bond yields and emerging growth headwinds. 

The SPX touched its rising 50-day moving average near 5126 yesterday before reversing to close slightly below that level.

This week’s Fed meeting has largely been de-risked due to significant repricing in rate expectations.

The SPX is testing near-term resistance at 5119. A sustained break above that level would shelve our tactically bearish outlook.

Yesterday’s note on the disinflationary implications from April flash PMI and record high real yields have started another branch for

Ten-year real yields (nominal yield – inflation expectations) are at an historical high of +225bp.

Yesterday’s recovery in US equities was primarily driven by short covering into a busy week of earnings.

Last week’s ~3% decline in the SPX followed a ~12bp backup in 10-year yields amid an upside retail sales print

We entered a new phase in markets when 2-year Treasury yields broke above 4.80%. This was the level we identified

Monday’s upside retail sales number (proxy for GDP growth) combined with three consecutive hot CPI prints are now driving increased

The relatively muted reaction in commodities means that geopolitical headlines had little to do with yesterday’s sell off in equity

US equities begin the week lower as investors digest the weekend’s geopolitical developments in the Middle East.

US equities are broadly lower after a hotter-than-expected CPI print.

Option pricing implies a 1.3% (+/-) move following tomorrow’s CPI print. Consensus is looking for a +0.3% MoM increase in

Wednesday’s CPI report is the most important near-term catalyst, with consensus is looking for headline MoM CPI to come in

The intraday sell-off in equity markets yesterday started with a spike in crude prices, which led to a small spike

The March ISM services print, including a sharp drop in price, provided relief to markets after Monday’s hot ISM manufacturing

Yesterday’s pullback in the SPX triggered a number of questions about whether this is the end of the rally.

The recent backup in yields has put renewed upward pressure on bond market volatility (MOVE index).

Last week, the SPX managed to advance +39bp despite month-end/quarter-end rebalancing pressures during a holiday-shortened week.

This week’s rotation out of momentum stocks could merely be a function of month-end/quarter-end dynamics.

Recent yen weakness in the aftermath of the BOJ’s first rate hike in 17 years and dovish tone from Fed

Last week, 10-year bond yields pulled back from technical resistance near 4.35%. Now at ~4.25%, we see scope for 10-year

Month and quarter-end rebalancing could pressure stocks this week.

The public release of Chat GPT in November ’22 kicked off an AI arms race that still looks like it

With an eye out for bearish triggers, the official Fed statement exiting tomorrow’s meeting is expected to be little changed

Markets are being driven by company-specific developments ahead of a busy week of macro catalysts including five central bank meetings.

The front end of the yield curve may now be responding to the hot January/February inflation prints. Two-year yields reached

Yesterday’s hotter than expected core CPI print resulted in higher bond yields, which may have temporarily interrupted the unwinding of

Position squaring and hedging coming into today’s data are being unwound this morning as the CPI print came in ‘no

The most significant events of the week are still to come with: 1) Powell’s testimony tomorrow and Thursday; 2) ECB

The most significant events of the week are still to come with: 1) Powell’s testimony tomorrow and Thursday; 2) ECB

On Friday, the cyclically-sensitive RTY managed to close above our technical resistance number of 2070.

US equities are mostly higher with the small cap Russell 2000 (RTY) outperforming large cap indices for a second day.

Markets remain in a holding pattern ahead of tomorrow’s January core PCE print and Friday’s ISM report.

The small-cap, cyclically-sensitive Russell 2000 (RTY) continues to trade beneath key range resistance near ~2070.

OIS markets are now priced for 70bp of rate cuts in CY’24, which is now lower than the 75bp from

There were no major surprises in yesterday’s release of FOMC meeting minutes, although some note dovish implications from advanced discussions

The momentum factor is unwinding at the moment with hedge fund and retail investor positioning metrics at/near record levels.

US equities are mostly lower as we start the holiday-shortened week with a mild flight to safety.

Technical resistance for the SPX is the range-measured objective of 5099. We see that level holding at least until 10-year

Charles Dow developed ‘Dow Theory’ back in the late 1800s and it still works today – in one form or

Yesterday’s orderly decline in equity markets suggests the broad macro outlook remains relatively benign. 

The hot CPI print means that markets will pay close attention to the week’s remaining inflation numbers, including PPI revisions

It’s a fairly quiet session as markets await tomorrow’s January US CPI print. US equities are mostly higher with the

The cyclically-sensitive Russell 2000 (RTY) has underperformed large-cap indices since the late-December rejection of technical resistance near 2050.

The SPX rally decelerates on the approach to 5000 with narrow leadership and early signs of bearish momentum divergence.

The S&P 500 (SPX) is approaching what could be a psychological resistance level at 5000, while the median sell-side strategy

Three months of a relatively benign macro backdrop has resulted in low equity volatility and higher valuations, though narrow leadership

Friday’s Jobs Report was the fourth consecutive January where non-farm payrolls doubled consensus estimates.  

As expected, Powell used some of yesterday’s press conference to push back on March rate cut expectations.

As expected, Powell used some of yesterday’s press conference to push back on March rate cut expectations.

US equities are lower after overnight earnings failed to meet a very high bar, with post-earnings downside in MSFT and

The SPX is currently butting up against trendline resistance near 4925. From a technical perspective only, the SPX needs to

The SPX has held up well due in large part to the outperformance of large cap Tech, which will be

The logic behind pricing in a March rate cut originally came from Fed officials’ repeated emphasis on the annualized 6-month

This week’s ramp in CQ4 earnings season will be a test for the momentum-driven rally.

Yesterday’s updated Summary of Economic Projections (SEP) clearly supports market expectations for a soft landing, especially when compared to the

The updated dot plot will likely attract the most attention when the Fed releases its Summary of Economic Projections later

Market-based probability for a March rate cut has declined to 44% into tomorrow’s Fed meeting from 65% last week.

Consensus is looking for headline CPI of 0.0% MoM and 3.1% YoY. A MoM headline CPI print of +0.1% wouldn’t

Ten-year bond yields have started a short-term mean reversion trade with the benchmark rate lifting from key support levels.

Labor market data should become a bigger input for Fed policy expectations going forward.

The year-end momentum reversal usually results in Eurozone indices outperforming US benchmarks.

The positive correlation between stocks and bonds breaks down today as yields move lower for the ‘wrong reasons.’  

The rotation out of mega-cap Tech and into YTD underperformers will likely continue for the next couple of weeks.

The recent rally in equity markets in response to a peak in bond yields is normal/expected.

Combining relatively subdued initial jobless claims with sharply higher continuing claims suggests that companies have curtailed hiring activity, while stopping

Yesterday’s dovish Fed comments, small uptick in consumer confidence and better-than-feared early holiday shopping trends has started early rotation into

Month-end rebalancing dynamics are in play with pension funds better to buy bonds given performance differentials.

A US soft landing in 2024 is the prevailing narrative with risks skewed toward a potential recession.

A recent sell-side report suggests that crowding across hedge funds has reached a record high with the average fund holding

A recent sell-side report suggests that crowding across hedge funds has reached a record high with the average fund holding

Last week’s cooler-than-expected CPI print increased conviction that the Fed is done with its hiking cycle, resulting in equity upside

We expect 10-year yields to remain above our 4.48% bullish inflection target for the remainder of Q4.

The pullback in bond yields has been the main driver behind the week-long relief rally in equities.

The pullback in bond yields has been the main driver behind the week-long relief rally in equities.

The pullback in bond yields has been the main driver behind the week-long relief rally in equities.

The pullback in bond yields has been the main driver behind the week-long relief rally in equities.

Yesterday’s equity rally carries over as 10-year yields sink below 4.70% after the Treasury announced plans to slow the pace

The pullback in bond yields keeps a tenuous relief rally in the conversation, but the move falls short of signaling

Today’s dip in longer-dated bond yields follows a relatively benign BOJ policy outcome.

The lack of a broadening Middle East conflict and oversold conditions drive today’s bounce in equity markets.

Earnings are in focus after an unusually high number of overnight disappointments. 

Elevated Treasury supply and waning demand remain primary drivers of the higher bond yield environment.

This morning’s reprieve in bond yields is helping the CBOE Volatility Index (VIX) come off highs approaching our ‘elevated’ threshold

The backup in bond yields became dislocated from their fundamental drivers about three weeks ago.

Takeaways from Powell’s anticipated address to the Economics Club of NY seem a bit more dovish than the consensus message

Geopolitical concerns are getting more attention after an explosion at a Gaza hospital complicates diplomatic efforts to ease the Middle

A resumption in the yield backup follows a hotter-than-expected September retail sales number.

The end of a Fed hiking cycle once inflation is vanquished should be positive for risk assets. Equities have reacted

An end of the hiking cycle doesn’t mean the tightening cycle is over.  Ongoing QT operations by the Fed and

An end of the hiking cycle doesn’t mean the tightening cycle is over.  Ongoing QT operations by the Fed and

Two weeks ago, the backup in bond yields disconnected from fundamental drivers of inflation expectations, growth data and Fed expectations.

A blow-out non-farm payroll number of +336,000 is combined with smaller wage gains to breathe temporary life into the soft-landing

The focus remains on the recent backup in bond yields with markets in waiting mode ahead of tomorrow’s Jobs Report.

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

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

The SPX is down ~7% from its YTD high on July 31 as 10-year Treasury yields have risen from 3.96%

Investment Grade, High Yield and Emerging Markets CDX credit spreads continue to widen as a possible sign of emerging credit

Today’s curve steepening takes the 5/10 yield spread to -8bp with technical resistance at -7bp.  A break above -7bp would

US consumer strength has been a major reason to doubt near-term recession risk all year, but some cracks are beginning

Today’s risk-off trade follows yesterday’s Fed meeting and updated dot plot that removed 50bp of easing expectations in ’24.

Almost all developed markets have been forming bearish distribution patterns over the last two months and the small-cap Russell 2000

It’s otherwise quiet into tomorrow’s Fed decision with OIS markets still pricing in a pause, while the probability for another

The Fed is widely expected to pause at this week’s meeting. The updated dot plot seems to be the wildcard

The NY Fed’s Empire manufacturing survey was stronger than expected, with new orders and prices received surprising to the upside.

This morning’s August CPI print did little to shift the inflation narrative in either direction. Headline CPI came inline, up

This morning’s August CPI print did little to shift the inflation narrative in either direction. Headline CPI came inline, up

Implied equity volatility has been a nonfactor for markets since late March, which is why we’ve added it to the

In our opinion, the near-term bullish narrative first needs to include an implicit or explicit announcement from the Fed that

A combination of rising oil prices and heavy corporate bond issuance on Tuesday plus yesterday’s stronger ISM services report will

ISM services for August came in stronger than expected with new orders, employment and prices all higher MoM. The data

September always brings a lot of discussion about seasonality given that it’s the worst performing month of the year. But

Yesterday, 10-year bond yields reached our near-term target of ~4.09% intraday, while the 5-year yield has dipped but remains above

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

US equities will continue to take direction from bond yields with expectations for downside in 5-year yields to steepen the

Attendance will remain light through Labor Day as we enter a catalyst vacuum over the next week, which we expect

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

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

Equity markets fully embraced the disinflation theme following a cooler June CPI print, but investors now seem a bit hesitant

The recent widening in credit spreads should be closely followed in the days ahead. Recession risk has been priced out

Last week’s pullback in equity markets was driven by a volatile week in the bond market.  The volatility may have

We’ve recently intensified our focus on a 60-day tactical window based on a growing expectation for the Fed to end

Steep curve inversion and tepid US growth data from Q4’22-Q1’23 generated consensus for an imminent recession and led to a

Fitch explained its US credit rating downgrade as “expected fiscal deterioration over the next three years.

Yesterday’s Senior Loan Officer Opinion Survey (SLOOS) pointed to tightening lending standards and low demand.

Ten year yields still look like they peaked last October at 4.2%.  A new high in the 10-year yield would

Yesterday’s stronger Q2 GDP print, firmer durable goods orders and lower weekly jobless claims number resulted in higher bond yields.

The S&P 500 (SPX) is currently trading above technical resistance near 4565. Closing levels north of 4567 would likely deliver

Yesterday, the S&P 500 (SPX) managed to close at our predetermined technical watershed level of 4567.  Closing levels above 4567

Markets are priced for a 25bp rate hike and a message that signals a pause in the hiking cycle. The

We suspended our tactical bearish bias back in early June based on improved market breadth, cyclical sector leadership and a

US equities are mostly higher after yesterday’s sell-off in mega-cap Tech took the Nasdaq 100 (NDX) down more than 2%,

The S&P 500 (SPX) has reached the upper end of technical resistance in the 4515-4565 range. A close above 4567

The S&P 500 (SPX) has reached the upper end of technical resistance in the 4515-4565 range. A close above 4567

The macro narrative continues to shift toward a soft landing after yesterday’s Empire Fed manufacturing index came in better than

The Fed has entered its blackout period ahead of the July 26th FOMC meeting, but former Vice Chair Clarida said

US equities are mixed with the S&P 500 (SPX) on track for a +2.7% weekly gain. The equal weight S&P

It’s possible that central banks may be underestimating the potential pace of global disinflation.

Inflation remains top of mind as the initial equity market reaction to today’s CPI print matches our scenario analysis from

Tomorrow’s June CPI report is an important catalyst for markets with consensus looking for a headline number of +3.2%, down

Friday’s softer non-farm payroll number was the first miss after 14 consecutive months of hotter-than-expected readings.

The S&P 500 (SPX) decelerates on its approach to technical resistance in the 4515-4535 range as the rally shows signs

Today’s advance in 2-year yields drives the risk free rate beyond the earnings yield on the SPX. Using Bloomberg consensus

The soft landing narrative is challenged as weaker factory orders number lead to the first downtick in the US Economic

The S&P 500 (SPX) has been able to keep its upward momentum despite rising bond yields. Over the last six

US data is back in focus after a steep drop in weekly jobless claims and big upward revision to Q1

Mixed messages inform the near term SPX outlook. The overbought status we referenced for the S&P 500 (SPX) on Friday

The primary driver this morning is US economic data that is better than expected. May durable goods orders posted an

Equities are starting the week mostly lower into month-end and quarter-end rebalancing. Given the recent rally in equities and sell-off

US, Eurozone and UK flash manufacturing PMI missed expectations and fell deeper into contraction, while services held up better. The

Tomorrow brings flash PMIs for June which will provide incremental guidance on the growth outlook. Expectations are for US flash

Markets are waiting for a traditional recession or soft landing to follow the Fed’s tightening cycle, but there may be

As the S&P 500 has rallied +6.8% over the last five weeks to technically overbought levels, consider markets can stay

The S&P 500 has gained +5.7% since the index broke technical resistance at ~4200. Thin leadership and narrow breadth on

We are pricing for a pause although the market-based probability of a July rate hike rises to 67% after yesterday’s

Markets wait on today’s Fed policy decision at 11am PT followed by Powell’s press conference  at 11:30. We expect the

Widening market breadth beginning in late May removes a key technical concern for the sustainability for the rally. Participation from

Consensus is looking for YoY headline CPI to drop to +4.1% from 4.9% last month and the core rate falling

US equities are mostly higher after the S&P 500 ended yesterday up more than +20% from its 52-week low in

Yesterday, the S&P 600 small cap index (SML) managed to close above the upper end of its March-May range, giving

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

Today’s ISM services report fits the disinflation narrative that reemerged in mid-April. Last week’s string of disinflationary May prints point

The upside in equity markets this week can partially be attributed to a string of disinflationary reports including cooler than

The S&P 500 (SPX) is trading above 4200 with cyclical leadership and broad sector participation. The improvement in market internals

The 2-year Treasury yield is reversing from technical price support in the 4.51%-4.59% range.  The 10-year note has reversed from

Assuming the debt ceiling agreement is passed this week simply means that market attention will shift back to the challenging

Headlines suggest the two sides remain nowhere near an agreement, with the market-based probability of default at ~25% and rising.

Yesterday’s risk-off trade occurred 10 days before the estimated debt ceiling x-date of June 1.  The timing of the sell-off

The S&P 500 (SPX) has extended to the upper end of technical pattern resistance near 4200 with thin leadership in

A short-term extension to August is the most likely scenario given the estimated ex-date of June 1 and time required

A BofA consumer report for April showed total card spending per household fell -1.2% YoY, which is the first YoY

A Fed pause is only bullish for stocks when it occurs in a low inflationary environment. We continue to think

The debt ceiling ex-date has been pulled forward by ~2 months due to lower tax receipts, presumably due to lower

The technical setup for the S&P 500 remains challenging into strong resistance in the mid-4100s. Bearish momentum divergence seen on

This morning, the 5/10-year yield curve flipped into positive territory for the first time in 9 months. A positively sloped

Two of the three most likely Fed scenarios would likely result in upside for the S&P 500. Though the probability

The probability for a technical US debt default remains below 10%, but the likelihood for a credit rating downgrade may

The S&P 500 is extending to the upper end of its technical resistance range below 4200.  A sustained break above

Bearish momentum divergence signals triggered at the end of last week while the index was overbought. The positive YTD performance

Today’s risk-off trade follows bearish momentum divergence signals late last week. The S&P 500 was in technically overbought territory when

Afternoon results from FRC will impact near-term regional bank sentiment. Relatively stable deposit flows and unchanged loan growth guidance are

Takeaways from the earliest Q1 reports reveal strength in high-income consumer spending and travel demand.

Signs of easing banking sector stress has resulted in a return of the soft-landing narrative, higher bond yields and more

Light equity positioning and elevated bearish sentiment have been major supports for equity markets in the recent past.  

The recent backup in bond yields looks like normal consolidation in a developing bullish trend. The term ‘bullish trend’ refers

We’ve been saying for several weeks that strong technical resistance in the mid-4100s should cap the S&P 500 (SPX) until

The ISM new orders/inventory ratio has been signaling accelerated PPI disinflation for the last several months. Producer prices tend to

The debate over a 25bp May rate hike is less important than the disconnect between Fed rhetoric and market expectations

It’s a relatively quiet session as market participants wait for directional clues in tomorrow’s CPI report and Fed meeting minutes.

The major catalyst this week is Wednesday’s CPI print, which should provide more clarity for the Fed’s expected near-term policy

An expected collapse in bank credit creation should accelerate the disinflationary cycle. Every bank wants to exit Q1 with more

Bond prices and equity prices have been positively correlated for the last 14 months. Over the long run, these two

The S&P 500 (SPX) has moved into a strong technical resistance range between 4050-4200 with a challenging fundamental backdrop. Breaking

The S&P 500 (SPX) has moved toward strong technical resistance in the mid-4100s. We expect this range will cap the

The S&P 500 (SPX) is advancing toward technical resistance in the 4100s on strong growth sector leadership. The rotation into

Calls for increased bank regulations fit the disinflation and recession narrative, driving the rotation into growth equity sectors.

There was no obvious catalyst for yesterday’s pullback other than the end of Washington hearings on recent bank failures without

FCNA’s acquisition of SIVB assets and deposits has helped near-term risk sentiment, but markets are still looking for additional policy

Recent equity market resilience has been driven by lower bond yields and rotation into growth sectors. Sidelined cash and value

Credit standards have been tightening over the past year as banks anticipate a recession. The tightening of credit standards will

A week-long back up in 5-year Treasury yields stalls out at moving average price support near 3.80%. The decline in

In addition to the Fed decision, markets will pay close attention to Powell’s press conference for: 1) near-term direction on

The debate over whether the Fed hikes by 25bp or decides to pause at tomorrow’s meeting seems less important when

A de facto end of the tightening cycle has driven bond yields and kicked off equity rotation into growth sectors

Rotation into growth from value sectors began late last week after 10-year real yields reversed from strong technical resistance at

Bond market volatility has spilled into equity markets and other cross markets amid low liquidity conditions. Implied equity volatility as

Silicon Valley Bank’s failure highlights the pressure of rising funding costs. The Fed backstop on deposits at SIVB and SBNY

The Fed’s decision to provide liquidity has markets speculating the central bank may elect to leave rates unchanged when it

Yesterday, we discussed the negative impact on bank deposits and assets from the Fed’s QT operations. The Fed’s QE program

In a clear signal from banks, US large cap and regional bank indices are down ~10% for the week after

Multiple factors combine to create a challenging outlook for equities. Yesterday’s testimony from Fed Chair Powell triggered a ~1.5% sell

Longer-dated bond yields have limited room to lift from current levels given hawkish rate expectations and the potential for a

US equities are mostly higher into a busy week of macro catalysts.

At current levels, the S&P 500 (SPX) is essentially unchanged from where it stood last April when terminal rates were

At current levels, the S&P 500 (SPX) is essentially unchanged from where it stood last April when terminal rates were

Short-term support is in focus as the global disinflation cycle is challenged by recent hotter-than-expected inflation data including US ISM

February US growth data disappoints for a second day with consumer confidence, Chicago PMI and Richmond Fed Index all missing

A higher median dot coming out of the March 22 Fed meeting is the most apparent near-term risk for equity

. Bond markets are larger and more liquid than equity markets, so when there’s a disconnect between the behavior in

A downward revision to Q4 GDP and upward revision to Q4 PCE inflation have investors cautious ahead of tomorrow’s core

Ten-year Treasury yields are approaching resistance near 3.90% where we expect mean reversion to kick in and pull yields back.

The no-landing narrative that emerged after the strong January payroll number drives a cyclical recovery theme in equity markets.

The recent resilience of the S&P 500 (SPX) amid the bearish repricing of Fed rate expectations comes from an emerging

As we noted yesterday, we’re discounting the signal quality of the January payroll data given the outsized role of seasonal

Let’s review potential CPI scenarios as equity markets will take initial direction from headline CPI, due tomorrow.

US equities are mixed with the S&P 500 on track for its worst week of 2023.

Catalysts ahead include Michigan inflation expectations and two Fed speakers tomorrow, but markets remain focused on Tuesday’s CPI report.

Terminal rate expectations drift higher as Fed officials answer questions about last week’s strong Jobs Report.

The focus today is on Fed Chair Powell’s comments at the Economic Club of Washington.

Last week, the S&P 500 (SPX) extended through near-term technical resistance at 4100 as the OIS market began pricing in