while we slept (UST volume ran ~275% of the avg); misery loves company; how much DEFLATION? no hidin' from bad news ...
Good morning…I love the smell of price discovery in the morning (seen randomly on twitter and making it my own) …
Noting the ‘Adult Swim!’ signs as you flip on the screens today, the LAST thing you need or want is MORE bla from a guy who’s no longer in ‘the game’ SO I’ll be brief…
Stocks are down (Mike Wilson told has repeatedly told us so — HERE, ZH HERE and his latest weekly missive — Growth Risk Rises as Consumer Debate Ends, HERE). Even GOLDILOCKS SAYS — Goldman Sees S&P Tumbling To 3150 When The Recession Hits via ZH)
Bonds are down.
BITC is down.
There is seemingly very little (or NO) place to hide. Some will say bonds are worse off. Others will note how poorly stocks are trading.
Misery loves company?
… here is a snapshot OF USTs as of 746a:
… HERE is what another shop says be behind the price action, you know,
Treasuries are lower (UST 2yr yields +43bp from Thursday's close at one point overnight) and the curve flatter past 3yrs as global rate and risk markets internalize Friday's US inflation readings. What news we collected is linked above, DXY is higher (+0.6%) while front WTI futures are lower (-1.6%). Asian stocks were all in the red (Nikkei -3%), EU and UK share markets are a sea of red too (SX5E -2.2%, SX7E -2.8%) while ES futures are showing -2.2% here at 7:20am. Our overnight US rates flows saw a MASSIVE amount of block futures trades posted (at least 16 blocks by our count) while our cash flows were 'very large' with 2-way flows in intermediates into the early sell-off while Asian real$ sold the back-end outright after the curve turbo-flattened earlier. Overnight Treasury volume was very solid at ~275% of average overall while futures predictably saw even higher average turnover overnight.
… US news: *175BPS OF FED HIKES SEEN BY SEPT., WITH AT LEAST ONE 75BPS MOVE- BBG 3:44am Aggressive Fed moves back in play BBG Sizzling prices complicate the Fed's inflation fight WSJ Big crypto lender freezes all account withdrawals, another bad piece of news after a brutal weekend (XBT -12.5%) for crypto WSJ US Gasoline prices average $5/gal for the first time WSJ Some of the biggest US food suppliers and restaurants say that they would continue to raise prices as they face starkly higher costs WSJ Rise in USD to multi-decade highs cost US companies billions in earnings FT US banks finally see upturn in credit card borrowing RTRS Study finds that passive investing has increased US stock volatility FT
… Tsy 5s30s curve, daily: Friday morning we highlighted and chatted about Thursday's closing breakdown in 5s30s below an Ascending Wedge pattern traced out in recent months. We talked about how reliable such breakdowns can be. We had no inkling that we'd return toward the move lows (-15bp area) so quickly. The battle near -15bp could be interesting/telling...
… and for some MORE of the news you can use » IGMs Press Picks for today (13 June) to help weed thru the noise (some of which can be found over here at Finviz).
I’ve wasted this much of yer time I might as well waste a touch more with Barclays (same who called for 75bps hike) latest
Macro House View Weekly: Hot and bothered
Another record inflation reading in the US gives the Fed good reason to hike more aggressively than expected
Or perhaps something like this — latest from UBSs Paul Donovan asking,
The Fed has a classic dilemma. Inflation is mainly driven by either prices it cannot control (commodity related) or prices no one pays (owners’ equivalent rent, which is signalling a rising price of home ownership when most US home owners pay a lower price than two years’ ago). Many prices the Fed can influence are in disinflation or outright deflation (over 3% of the CPI basket has year-on-year deflation). The Fed’s dilemma is how much more deflation to create in prices it can control, to offset the inflation in prices it cannot control.
US Michigan consumer sentiment showed a rise in long-term inflation expectations. Expectations only matter if they change consumer behavior, and there is little evidence of that in wage-setting. Consumers are also terrible at forecasting inflation—the last time expectations were over 3%, the outcome was an average 1.3% inflation rate with several deflation episodes…
CHARTS? Why not. 1stBOS
Market Spotlight: A further deterioration for US Equities
We have consistently held a tactical negative outlook for US Equity markets, led up to now by Growth, Tech and Cyclicals and have held the view the rebound from our 3855/15 objective for the S&P 500 was a rally to fade.
The recent recovery in the S&P 500 and the Nasdaq 100 was unable to test never mind clear even first resistance zones from their 63-day averages and 38.2% retracements of the 2022 decline. This combined with the poor price action last week and the negative volume picture suggests the corrective rebound from late May is already over and the core downtrend has resumed.
We thus look for the S&P 500 to retest and break 3855/15, which would then be seen to clear the way for further weakness to what we see as its next major support test at 3505/00, a further fall of 10% from Fridays closing level.
Value stocks stays seen as key barometer as to the health of the broad US equity market and the S&P 500 Value index is weighing heavily on its major support at 1430/09. A sustained break below here would see a major top confirmed to turn the core trend lower for the Value space as well as reinforce the broader negative tone even further.
The US Health Care sector is also seen highly at risk to completing a major top with the sector ending last week undergoing a fresh and concerted test of key price support from the lower end of its medium-term range at 1457/47. A break and close below here would see a major top established to mark an important change of trend lower.
As already flagged we lowered our objective for the Nasdaq 100 back in May (see here) and we continue to look for a fall to a cluster of supports at 10780/590, which includes the 38.2% retracement of the entire uptrend from the 2009 GFC low and 200-week average.
Another few CHARTs which caught my eye this morning is from John Authers of BBG whos got look at 2yy and 10yy in his latest,
There's No Hiding From the Bad News This Time
… Meanwhile, two-year Treasury yields also burst out in epic fashion, passing the round number of 3%, and reaching their highest since December 2007. The rise has continued in Monday trading in Asia; at the time of writing the two-year yield stands at 3.12%. The market seems convinced that the persistent negligible yields in the years following the crisis of 2008 are finally over:
As for 10-year yields, they also rose sharply, without quite topping their high from last month. The pause for second thoughts is over:
That allowed the spread between two- and 10-year yields to tighten to less than 10 basis points, as of when I drew the chart. In Monday morning Asian trading, the spread had tightened to only 4 basis points. The so-called yield curve is regarded as a critical recession indicator; any enduring inversion, in which two-year yields rise above longer yields, is seen as a harbinger of a recession. This curve has had momentary inversions in 2019, and again in April of this year. Now traders must again confront whether they are prepared to move the curve into inversion. If they do this — and they seem minded to do so — this would imply that while yields must rise in the near term, they would subsequently fall. That’s consistent with the notion that the Fed will have no alternative but to tighten until it “breaks something”:
And … THAT is all for now. Off to the day job…