1. Moving the markets 

The tech sector led a rebound on Wall Street today, as investors snapped up bargains after a brutal week. The S&P 500 and Nasdaq Composite both gained ground, while the Dow lagged due to Boeing’s woes.

The rally in tech stocks came as bond yields eased, making the sector’s lofty valuations more attractive. Yields have been rising lately on expectations of higher inflation and a less dovish Fed.

This week, we’ll get more clues on the inflation front, with the CPI and PPI reports due on Thursday and Friday, respectively. Will they show that the Fed’s 2% target is still a pipe dream? Probably.

Speaking of the Fed, two of its officials gave mixed signals today on the outlook for monetary policy.

Logan hinted at the possibility of another rate hike, while Bostic projected a rate cut in the third quarter. They also disagreed on whether the Fed should slow down its balance sheet reduction. Confused? So am I.

The markets shrugged off the Fed chatter and focused on the positive. The MAG7 stocks, which have been underperforming this year, staged a comeback, helped by a short squeeze in the most hated names.

The dollar slipped a bit, but gold couldn’t capitalize on it. The yellow metal retreated from its recent highs but held above the $2,020 level. Crude oil, on the other hand, took a dive, dropping below $70 a barrel. That’s good news for drivers, who are enjoying the lowest gas prices since May 2021.

But how long will this relief last?

1. Moving the markets 

The Nasdaq Composite had another bad day on Thursday, dropping for the fifth time in a row — its worst run since last December.

Big tech stocks like Apple are not doing well this year, as investors are worried that they are too expensive and that the Fed might raise interest rates sooner than expected.

The economy, on the other hand, is doing fine, with strong job growth, low unemployment, and high service activity.

This boosted Treasury yields today, and made the market think that a rate hike in March is more likely. This pushed bond yields higher, with the 10-year breaking above its recent downtrend and touching 4% again but failing to close above it.

Stocks took a hit and the MAG7 (Microsoft, Amazon, Google, Facebook, Apple, Netflix, and Tesla) lost all their gains from last month. The Dow was the only index that managed to end slightly positive.

The Nasdaq and the Small Caps are down 3.5% this year, while the S&P is having its worst start since the 2008 crisis.

The dollar is on a roll, rising for the fifth day in a row, its best start to a year since 2005. Gold, however, recovered some of its recent losses and stayed above $2,040.

Financial conditions are getting tighter, which reminded ZeroHedge of what the Fed said in its minutes:

“Many participants remarked that an easing in financial conditions beyond what is appropriate could make it more difficult for the Committee to reach its inflation goal.”

Is the Fed trying to tell us that the market is too happy for its own good?

1. Moving the markets 

The Nasdaq Composite led the market lower for the third consecutive day, extending its worst daily drop since October 2023. Investors seemed to lose their appetite for the tech darlings of last year, which had soared on hopes of a dovish fed in 2024. But with the economy still struggling and no clear signal from the central bank on when it will start cutting rates, the wall street mood turned sour.

The Fed’s latest meeting minutes, released on Wednesday afternoon, did not help matters. They revealed that the fed was still reluctant to lower rates, despite its surprising shift from hawkish to dovish on December 13. The minutes said:

Participants generally stressed the importance of maintaining a careful and data-dependent approach to making monetary policy decisions and reaffirmed that it would be appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably toward the committee’s objective.

The only silver lining was that the fed officials expected three rate cuts this year, but they also admitted that there was a lot of uncertainty around the timing of these cuts. So much for clarity.

As ZeroHedge noted, this year’s plunge in stocks and bonds was the worst global start to the year since 1999 (and yesterday was the biggest daily loss in global market value since December 2022.)

The dollar defied the weak economic data and rallied for the second day in a row, posting its best start to the year since 1997. The ISM manufacturing index stayed in contraction territory (below 50) for the 15th straight month and job openings fell to a three-year low, dragging the Economic Surprise Index lower. Ouch!

It was a dismal day on wall street, with small caps taking the biggest hit (down almost 3%), the Nasdaq sinking further (down over 1%), and the Dow holding up relatively better.

The Mag7 barely budged, and the most shorted stocks tanked at the open and never recovered. The S&P 500 had its first two-day decline to start the year since 2015, while the Russell 2000 touched a crucial support level.

Bond yields spiked early on, but then reversed course in the afternoon with the 10-year briefly crossing the 4% mark before falling back. Oil prices surged by almost 4% due to escalating tensions in the middle east.

For the markets to bounce back, the fed needs to be more decisive, and global uncertainty needs to calm down.

Is that too much to ask?