Morning Notes — NDX Headwind

Given already high expectations, we don’t expect tomorrow’s US CPI release to become a major inflection event for markets.  Consensus expectations and extreme negative sentiment on the topic of inflation have equity risk/reward skewed to the upside on tomorrow’s print.

Bond yields: Ten-year Treasury yields have extended through technical resistance in the 2.58-2.63% range.  There’s a number of resistance indicators just north of 3%, while a contra-trend pullback in yields starts at levels below 2.55%.

NDX: Higher nominal bond yields has put pressure on growth sectors, but Tech multiples are most sensitive to rising real yields.  Ten-year real yields broke to a new cycle high of -0.41 on April 1, with a -3.82% performance in the NDX through Friday’s close.  The S&P 500 Index (SPX) was down -2.49% over the same period, while the S&P 500 Value Index (SVX) gained +0.25%.  Obviously, single position moves have been far more dramatic.  Ten-year real yields are currently -0.14, but still need to converge with nominal yields over time.  This will keep a lid on multiple expansion and create more frustration for investors trained to expect positive asymmetric performance from the Tech sector.