Just over a week ago, the labor market surprises were carrying the enjoined hopes of every equity market bull and ‘soft-landing’-believer on its lonely shoulders. By the end of this week, those hopes lay dashed to smithereens as wave after wave of reality checks sent the Labor Market data surprise index dumps back to ‘soft’ survey reality…
Source: Bloomberg
Most notably, today’s BLS revisions to the jobless claims data is a ‘game-changer’ as the trend is now clearly ‘bad’ for the labor market and ‘bad news is bad news’ again as the ‘recession’ fears build (not helped by The IMF’s downgrade of global; growth to its weakest in over 30 years).
Source: Bloomberg
And that had the impact one would expect in STIRs as terminal-rate expectations dropped (down at 4.95% in May now) and rate-cut expectations soared (more than 3 rate-cuts priced in for 2023)…
Source: Bloomberg
May remains a coin-flip for 25bps or pause, but overall expectations are well below the early week highs above 70%…
Source: Bloomberg
The Dow outperformed on the week with Small Caps the biggest losers and Big-Cap Tech also in the red, despite today’s pre-payrolls meltup…
The Dow found support all week at its 100DMA…
Defensives dominated Cyclicals this week (defensives are actually up 4 weeks in a row)…
Source: Bloomberg
Energy and Healthcare outperformed on this short week while Industrials and Consumer Discretionary lagged…
Source: Bloomberg
Regional Banks traded down to new post-SVB lows (still dramatically underperforming the big banks and the market)…
Source: Bloomberg
Treasury yields were down across the board with the short-end outperforming…
Source: Bloomberg
The 5Y and 10Y yield dropped to their lowest close since September 2022…(and note just how far below FF the 2Y yield is trading)…
Source: Bloomberg
The yield curve (2s10s) steepened on the week (though we saw flattening today after the claims data)…
Source: Bloomberg
But Powell’s favorite yield curve recession signal (3m18m fwd – 3m) massively flattened this week to record levels of inversion… screaming recession imminent.
Source: Bloomberg
US Mortgage rates tumbled for the 4th straight week (but with job losses building, we wouldn’t get too excited about a homebuilder come back quite yet)…
Source: Bloomberg
Notably, the spread between the 30Y mortgage rate and the 10Y TSY yield has never been wider…
Source: Bloomberg
The dollar ended the short week lower…
Source: Bloomberg
Cryptos were mixed this week (since Friday’s “close”) with Bitcoin slightly lower, Ripple lagging, and Ethereum outperforming…
Source: Bloomberg
Bitcoin rallied up near $29k intraday during the week and Ethereum neared $1950 before fading back today (its highest since Aug 2022)…
Source: Bloomberg
A wild week in commodity-land with oil surging on OPEC+’s surprise production cut, precious metals outperforming (dovish data), and Nattie clubbed like a baby seal…
Source: Bloomberg
Gold surged this week to its second highest weekly close ever…
Oil largely traded sideways from Sunday’s open with WTI basically swinging between around $80 and $81 all week…
Henry Hub NatGas plunged to a $1 handle once again today as forecasts showed unusually mild weather by mid-April, while traders parsed a government report that showed an inventory drop in line with analyst estimates.
Finally, ahead of tomorrow’s “most important-est ever” payrolls print, we note that the STIRs market is completely ignoring any and all FedSpeak and DotPlots about “higher for longer” rates…
Source: Bloomberg
And in fact, as Bloomberg’s Simon White notes, “higher for longer” rarely plays out like that in practice.
In fact, the median time between the last Fed hike and the first cut is only four months, while the average time is only six weeks.
In a sign of how quickly things can turn, it wasn’t long ago when the market was pricing in several more Fed rate hikes…
Source: Bloomberg
The market was pricing in 100bps of hikes by year-end after Powell’s hawkish comments on March 8th, and swung to pricing in 105bps of cuts by year-end on March 24th.
And this week has seen those rate-cuts priced in more dovishly.
