1. Moving the markets

Friday’s rebound of hope found some support mid-session today, but suddenly lost steam and the major indexes headed back into the red except for the Dow, which eked out a small gain. It was another frustrating day for the bulls, with especially the Nasdaq getting hit hard again.

Trading was choppy as concerns of a slowing economy, along with higher interest rates and soaring inflation, have negatively influenced sentiment and appear to be permanent companions—at least for the foreseeable future. To no surprise, this has been a downer for all equity markets as MarketWatch pointed out:

The major averages have fallen well off their record highs. The Dow and S&P 500 are 12.3% and 16.3%, respectively, below all-time highs reached in January. The Nasdaq is squarely in bear market territory, down more than 27% from its November record.  

According to ZH, the Empire Fed Manufacturing index bit the dust big time and dragged down the US Macro Surprise Index into the red for the first time since February.

Bonds rallied a bit, as yields retreated, but the moves were tiny and still aided TBF, which rallies with rising yields, to a positive close. The US Dollar tumbled, as gold advanced to recapture its $1,800 level, followed by Crude Oil, which almost touched $115 intraday.

The best performer of the day, as you might have expected in this inflationary environment, were commodities with the DBC ETF scoring a solid +1.64% gain.    

1. Moving the markets

The pattern, that early ramps get wiped out during the session, has been occurring with such regularity, that we could conclude that they are merely dead-cat-bounces, i.e., hopeful leaps with no connection to reality.

Today was no exception. The chart above clearly demonstrates that occurrence and here again, the major indexes got spanked, despite a late day rebound above the unchanged line.

As ZeroHedge pointed out, today is the biggest 5-day drop for stocks since 3/20/20, with the S&P 500 now clearly having lost its 4k level:

• Nasdaq is now down over 29% from its highs, Dow down over 17%, and the S&P almost 14%.

Today’s April CPI report of 8.3% YoY, while an improvement from March’s 8.5%, was higher than the expected 8.1%. Hope that inflation may have peaked, was nothing but wishful thinking, and that reality set in later and pulled the major indexes into the red.

As I have repeatedly said, the Fed is way behind in its attempts to curb inflation, and a far more aggressive approach is needed to not only conquer the price increases we are experiencing now—but also to get a handle on potential hyperinflation and a cost-of-living crisis. A puny 0.5% hike in the Federal Funds rate will not do it.

Bond yields spiked but pulled back late in the session, with the 10-year retreating from its 3.06% intra-day high to close down 7 bps at 2.93%.

Crude Oil bounced back above $100, gold had a decent showing, but is still trying to climb back above its $1,900 level, and retail gasoline prices set a new record. More astounding was the price of Diesel fuel, which absolutely exploded.  

Having said all that, the dreaded “S” word, as in Stagflation (inflation + no growth), is making the rounds again, with Bloomberg producing this chart as evidence.

1. Moving the markets

An early +500-point Dow relief rally died on the vine, as the index suddenly reversed course and dove into the red by -150 points before chopping and flopping around the unchanged line into the close. This marked the Dow’s 4^th consecutive decline.

The S&P 500 and Nasdaq followed a similar pattern but managed to eke out a green close with the former reclaiming its psychologically important 4k level. Overall, it appeared that the bearish mood has not subsided, it has merely taken a pause ahead of tomorrow’s all-important CPI number.

A variety of Fed speakers offered some much-needed hope to the beaten down bond- and stock investors with bon mots like “50bps-hikes are base-case, not sure if need to raise rates above neutral,” and “this was not a shock-and-awe Volcker moment.” This had the desired effect to prop up stocks, if only temporarily, and pulled bond yields off their lofty levels with the 10-year dropping back a tad below its 3% level to close at 2.994%.

ZeroHedge pointed out that financial conditions have tightened significantly and are now at the same level where Powell flip-flopped back to dovish in 2018. Will history repeat itself? Tomorrow’s CPI may give us a hint.

The US Dollar went sideways, Gold was held below its $1,900 level, while Crude Oil slipped below the $100 marker. US Retail Gasoline prices surged to a record new high but, as ZeroHedge explained with this chart “it’s still Putin’s fault, right?”