St.Louis Fed’s Jim Bullard buoyed the market briefly ahead of the cash open by being slightly less hawkish than his usual full hawktard self, but that didn’t last. The cash open saw the ubiquitous bid evaporate quickly to the lows of the day but the dip-buyers ramped back in to lift stocks into the Fed Minutes.
And while macro data has soared since the last FOMC meeting, so have inflation expectations…
Source: Bloomberg
The biggest takeaway from the Minutes appeared to be the contradiction of Fed Chair Powell’s nonchalance at the easing of financial conditions, which is in itself a hawkish shift (despite an overall sentiment gauge suggesting this was a notably dovish minutes):
“Participants noted that it was important that overall financial conditions be consistent with the degree of policy restraint that the Committee is putting into place in order to bring inflation back to the 2 percent goal.”
The markets have a long way to go catch up to that reality…
All of which left stocks lower (but not dramatically so) on the day with The Dow and S&P the biggest losers…
The S&P broke 4,000 and tested the 200DMA before bouncing late on…
The cash open short squeeze faded really fast…
Source: Bloomberg
Notably, using information from SpotGamma’s Hiro Indicator, the opening bounce was all call-buying (momentum ignition) and the rebound around 1030ET was also heavy call buying (and put covering). But once the Fed Minutes hit, a wave of heavy put buying came in (but even more notably, call buying was consistent – though smaller in magnitude – all the way down in the stock slide)…
VIX spiked up to the highs of the year this morning before fading back and then rallying once again as stocks sold off…
Treasury yields ended the day lower with the belly underperforming (7Y -1bps, 2Y -2.5bps, 30Y -4bps) leaving the belly lagging the long-end on the week so far.Yields did rise after the Minutes. The yield curve reversed all of yesterday’s steepening…
Source: Bloomberg
Ahead of the Minutes, the market’s expectation for the Fed’s terminal rate was 5.33% (July) and 13bps of rate-cuts priced-in for H2 2023. Both shifted hawkishly after the Minutes…
Source: Bloomberg
The dollar extended yesterday’s gains, erasing the majority of Friday’s losses…
Source: Bloomberg
Bitcoin slipped lower again, back below $24,000…
Source: Bloomberg
NatGas prices (Henry Hub) tumbled to $1 handle for the first time since Sept 2020 before ripping higher on reports that Chesapeake Energy will slow production…
And for context, US NatGas is trading at its biggest discount (on an oil barrel equivalent basis) to WTI Crude since 2012…
Source: Bloomberg
Oil prices are down for the 6th straight day with WTI back to a $73 handle
Gold slipped lower today, unable to hold $1850 again…
Finally, we note that The Mortgage Bankers Association data this morning showed the weakest level of Purchase Applications since August 1995…
Source: Bloomberg
Additionally, The Cleveland Fed’s own inflation forecasting model shows that the disinflation of the past few months has now come to an end (or a pause)…
Source: Bloomberg
Not exactly answering the ‘pivot’-positioned prayers.
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