[Chart courtesy of MarketWatch.com]

1. Moving the markets

Despite a last hour attempt to prevent another session in the red, after yesterday’s slam, the major indexes managed to climb back to their respective unchanged lines, as dip buyers were conspicuously absent. However, a late Market on Close (MOC) program propelled stocks off their lows.

Economic data points were solid due to persistently strong job openings beating expectations, despite a plunging number of quits. As ZeroHedge pointed out, this was the fifth consecutive beat of expectations, which was disappointing for the ever-present dovish “pause or pivot crowd.”

February’s ADP private payroll report confirmed that the economy stands on firm ground, at least for the time being. That sent rate hike expectations surging towards the 5.70% marker, while the odds of A 50bps hike in March sprinted to 70%.  

In the absence of a short squeeze, the “most shorted stocks” limped lower for the third consecutive day thereby aiding bearish momentum.

Bond yields dipped early on but headed higher late in the session, with the 10-year breaching its 4% level to the upside, but again it was not able to close above it.

The US Dollar bobbed and weaved and closed unchanged, as did Gold, with the precious metal surrendering its early gains.  

While Industrial and Survey data have been plunging, the Labor Market has shown surprising strength, which makes me wonder if some of these numbers are out of whack?

Will that alligator snout snap shut one of these sessions?

Hmm…

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Today, it was Powell himself singing from the same hymn sheet that his mouthpieces have used for months, namely rates may need to go “higher for longer,” a theme I have pounded on ad nauseum.

Maybe today, market participants are finally buying what Powell is selling, which caused havoc in all asset classes, since there was no place to hide other than in cash. The fear now on Wall Street is that the expected 25bps interest hike at the next Fed meeting will give way to a more hawkish move of 50bps. That number had not been priced in at all, but its odds have now risen to above 60%.

Powell’s expressed his hawkish warning like this, as ZeroHedge pointed out:

…. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes… The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done.

Even though the above was nothing new, the markets were rudely awakened from their dream state of imagining “pause or pivot” soon. That type of wishful thinking was crushed for the time being, as Terminal Rate Expectations propelled to the 5.65% level.

Bond yields were mixed with the short end exploding higher, as the 10-year crossed above 4% again, but it was not able to hold that level, stalled and “only” closed up 12bps at 3.98%.

As a result, the US Dollar surged +1.21%, as higher rates make the currency more attractive, Crude Oil crashed about 4%, and Gold was clubbed for a variety of reasons, like fraud by the Perth Mint, a strong dollar and Powell’s hawkish speech. The precious metal managed to successfully defend its $1,800 level.

The markets are now facing an onslaught of economic data ranging from tomorrow’s ADP and JOLTS reports, Friday’s non-farm payrolls, and next week’s CPI, PPI and retail sales.

While the directional outcome is uncertain, the fact that more volatility is on deck will keep the ongoing tug-of-war between bulls and bear alive.  

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Equities tried to build on last week’s bullish momentum with an early bounce, which coincided with sliding bond yields, as the 10-year slipped towards its 3.9% level.

However, a sudden spike in yields put the bears in charge, as the 10-year ripped off its lows and climbed back towards the 4% marker. That pulled the major indexes off their lofty levels and towards their respective unchanged lines.

In the end, not much was gained or lost. Upcoming events, like Fed head Powell’s congressional testimony on inflation and interest rates, as well as Friday’s jobs report, may have had a negative influence on traders’ and algos’ willingness to commit.   

The short squeeze, which usually accompanies early upward momentum, faded fast, as interest rates spiked. The US Dollar went sideways, while Gold slipped a tad after an early bounce.

Clearly, Wall Street was mired in uncertainty, and new directional impetus is needed, as the tug-of-war between bulls and bears continues.