Thursday, March 18, 2021

Morning Note: After Sleeping On It

In yesterday's morning note I suggested that if Fed Chair Powell didn't express a willingness to get in front of rising interest rates in yesterday's presser (via unconventional means [ycc] that didn't constitute a tightening) that we'd "see interest rates spike and stocks (tech especially) tank."

Well, he didn't offer up the assurance I suspected the market was after, but he did do a marvelous job of convincing that the Fed wasn't remotely in the mood to combat potential inflation by conventional means. I.e., the printing press would run till the cows come home, and the Fed funds rate would stay safely locked in the corral for a very long time going forward. 

Problem with all that being, the market doesn't -- at this point -- remotely buy the notion (also expressed by Powell) that inflation isn't nevertheless a threatening notion going forward.

So, after "the market" slept on it, it appears as though I may have (only for the moment) been onto something after all: The 10-year treasury yield is rallying hard, and the tech sector is down 1.65% early in today's session.

Here's what that looks like (10-year yield white, tech sector ETF red):

Asian stocks rallied overnight, with just 3 of the 16 markets we track closing lower.

Europe's leaning green as well this morning, with 11 of the 19 bourses we follow trading higher as I type. 

U.S. major averages are lower (Dow barely) to start the day: Dow down 3 points (0.01%), SP500 down 0.68%, SP500 Equal Weight down 0.31%, Nasdaq 100 down 1.81%, Russell 2000 down 0.90%.

The VIX (SP500 implied volatility) is up 3.90%. VXN (Nasdaq i.v.) is up 5.36%.

Oil futures are down 2.06%, gold's down 1.34%, silver's down 1.15%, copper futures are up 0.08% and the ag complex is down 0.58%.

The 10-year treasury is down big (yield up big) and the dollar is up a big 0.48%.

Led by banks, metals miners, financials, Verizon and AT&T -- but dragged by solar companies, MP (rare earth materials), India, tech and oil services, our core mix is off 0.37% to start the day.

Note: As it turns out, after The Conference Board's Index of Leading Economic Indicators is released this morning, there are no other updates to our 49 macro index inputs to score this week. So I'll be producing your macro update (although it'll be a brief one) a day early, before going silent till next Wednesday.

Like we've been preaching since late-summer 2019, and continue to preach:

"All crises have involved debt that, in one fashion or another, has become dangerously out of scale in relation to the underlying means of payment." -- John Kenneth Galbraith

Have a nice day!

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