Bonds, Bullion, & Black Gold Drop, Dollar Pops As Fed Confirms Hawkish Stance
ISM data confirming a contraction in employment across Manufacturing and Services, but showed prices remain extremely high screamed ‘stagflation’ and the ‘recession’ trade continued with growthy stocks rallying and commodities dumped. The Fed Minutes confirmed an “even more restrictive” stance on rates and the need to maintain (or rebuild) The Fed’s inflation-fighting credibility.
Overall the rate-trajectory shifted hawkishly today (but not by much)…
Source: Bloomberg
Specifically, rate-hike odds for July and September rose very modestly on the day
Source: Bloomberg
As Goldman’s Chris Hussey remarked, markets this year have been trapped on a merry-go-round of worry, with a rotating cast of concerns: growth, inflation, recession, rates, inflation, growth, stagflation, repeat. Right now it seems we are in ‘recession’ mode.
Small Caps were lower on the day as Nasdaq extended yesterday’s big rebound
Rather oddly – barbelling – Utes and Tech were the best performing sector on the day. Energy was the ugliest horse in the glue factory today…
Source: Bloomberg
Value and Growth factors managed gains today after yesterday’s massive growth outperformance (but as the chart below shows, we’ve seen these false starts before)…
Source: Bloomberg
Yesterday’s big short squeeze ran out of ammo today early on but did try to push back higher after Europe closed…
Source: Bloomberg
Bonds erased all of yesterday’s gains and then some with the belly of the curve smashed higher in yield (5Y +16bps, 30Y +9bps)
Source: Bloomberg
30Y Yields tested back below 3.00% for the first time since May today, then snapped higher…
Source: Bloomberg
The yield curve flattened notably on the day again…
Source: Bloomberg
The dollar extended yesterday’s gains…
Source: Bloomberg
Bitcoin was lower on the day but rebounded back above $20,000 during the US session…
Source: Bloomberg
The dollar strength and hawkish shift did gold no favors today as it fell further with Futs at their lowest since Aug 2021…
Oil prices fell once again with WTI trying and failing to regain $100 (as Brent broke below $100)…
As wholesale gasoline prices plunged again, now at their lowest since the start of May…
Finally, we note that next week brings the start of second quarter earnings season and a flurry of updates from Corporate America. However, this two week period is the ‘most-bullish’ segment of the year historically…
Source: Bloomberg
Oh and then there’s this… Bond volatility is on the verge of reaching its highest level ‘since Lehman’…
Source: Bloomberg
Think about how that will trigger a VaR shock!!??
Tyler Durden Wed, 07/06/2022 – 16:00
