TLDR; Retail sales - strong; Housing home builder optimism jumped; Industrial Production - better than expected.
'Real' economic data is rising once again as 'soft' survey data collapses (Empire Fed anyone?)...
Source: Bloomberg
Nothing there screams "six rate-cuts or we all die" as the issue remains: the current growth trajectory of the economy does not suggest that rates need to come down at all.
And as this growth/rates tango persists, yields on 10-year Treasuries are creeping higher (up 4bp today to 4.10%), putting pressure on risk assets that are priced relative to rates.
The strong overnight data, along with last week's slightly higher than expected inflation report may suggest to some that rate cuts may not be as necessary as urgently as markets have been pricing.. and Waller's comments yesterday pre-enforced that.
Sure enough, rate-cut expectations (timing and size) are tumbling...
Source: Bloomberg
The big drop in rate-cut expectations prompted bond yields to surge higher at the short-end.
The 10Y Yield extended its spike back above 4.00%overnight and closed above its 200DMA for the first time since 12/12/23...
Source: Bloomberg
Higher-rates hammered hot stocks as growthy-stuff and crappy-stuff was dumped. Nasdaq and Small Caps lagged, The Dow was the least ugly cow in the abattoir but still lower. A late-day bounce put a bit of lipstick on the pg but still not a pretty day...
Bitcoin continued in a narrow range since the chaos of last week's spot ETF launch...
Speaking of Bitcoin, did you know it's been the BEST performing Asset Class in 8 of the last 11 years?
Meanwhile the USD is having its best start to a year since 2015.
And as the US dollar rallied, so gold and the AUD declines.
And finally, never forget the 'twin inflation peaks' of the '70s...
Source: Bloomberg
Does Powell really want to be the guy who executed a massive rate-cutting cycle in an election year only to see what is left of The Fed's credibility utterly destroyed when inflation comes roaring back?
Happy Thursday!
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Andy is the founder of ANDIKA Pty Ltd, a licensed securities & derivatives dealer. He's the author of fiction and non-fiction books and has been a University lecturer on risk and investment.
