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Sunday, January 29, 2023

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Hawkish Fed & Horrible Data Hammer Stocks; Bonds & Black Gold Bounce

Another day, another set of ugly US macro data as PMIs plunged to post-COVID-lockdown lows (worse than expected), all of which sent the US Macro Surprise Index back into the red (this was the biggest weekly drop since May)…

Source: Bloomberg

That was then piled on by some FedSpeak, reinforcing the hawkish message…

DALY: “INFLATION IS TOXIC”, FED “IS FAR AWAY” FROM ITS PRICE-STABILITY GOAL, MAY NEED MID-4% OR MORE JOBLESS RATE FOR LABOR-MKT BALANCE

MESTER: HAVEN’T SEEN IMPROVEMENT ON SERVICE-PRICE INFLATION

And as if that wasn’t enough, she explicitly called out ‘the markets’:

DALY: DON’T KNOW WHY MARKETS ARE SO OPTIMISTIC ON INFLATION, PREPARED TO HOLD PEAK RATE MORE THAN 11 MONTHS IF NEEDED

MESTER: NEED TO KEEP FUNDS RATE ABOVE 5% IN ’23 TO CURB PRICES, FED HAS `MORE WORK TO DO ON INFLATION,’ IT’S TOO HIGH

Which remain massively (and dovishly) decoupled from The Fed’s expectations…

Source: Bloomberg

Fed rate-trajectory expectations are actually lower on the week, driven by the plunge after the cooler than expected CPI print on Tuesday, but have been rising since on Hawkish FedSpeak…

Source: Bloomberg

The ‘good’ news for The Fed is the hawkish talk has stopped financial conditions ‘easing’ any further from tightening policy positions…

Source: Bloomberg

This helped send stocks lower for a second straight week with Nasdaq the biggest loser…

Overnight saw selling pressure start as Europe opened again. Then everything reversed into the OpEx open which sparked a quick squeeze but that faded fast into the European close. Late in the day, the inevitable chaos of a huge quad witch expiration sparked a buying panic, but stocks ended the day red still…

The S&P ramp at the close lifted it back to its 50DMA…

We note that the original FANG stocks have now lost over 50% of their peak market cap from Nov 2021 (down to $2.5 trillion from a peak at $5.11 trillion), tumbling over $600 billion this week alone…

Source: Bloomberg

Treasury yields were all lower on the week with the short-end outperforming (2Y -16bps, 30Y -3bps) on the week…

Source: Bloomberg

The dollar ended the week unchanged, recovering all of its post-CPI plunge on the hawkish Fed statement…

Source: Bloomberg

A big round-trip in cryptos this week, running higher on the soft CPI and erasing gains on a hawkish Fed…

Source: Bloomberg

Gold and silver ended the week flat to very slightly lower. Gold futures managed to bounce back up to $1800 today…

But crude bounced higher after two ugly weeks, with WTI bouncing from a $70 handle up to almost $78 before fading back to $74 after The Fed…

Finally, cash continues to be king (and not trash as Dalio suggested) in 2022…

Will it continue to be in 2023?

This post was originally published on this site

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