Stocks Shrug Off Inflation Scare But Bond Yields Extend Spike

Update: The opening bell in US markets prompted panic-buying back to unchanged as stocks shrugged off any inflation scares...

Despite bond yields pushing to new cycle highs...

*  *  *

The "most-watched datapoint in history" just hit... and everything is hotter than expected...

Amid updated seasonal adjustments from BLS and strong base effects, Headline CPI printed a much hotter-than-expected 2.1% YoY (1.9% YoY exp)

The index for all items less food and energy increased 0.3 percent in January. The shelter index increased 0.2 percent as the indexes for rent and owners' equivalent rent both rose 0.3 percent, while the index for lodging away from home declined 2.0 percent over the month.

The apparel index rose sharply in January, increasing 1.7 percent after falling in previous months. The medical care index increased as well, rising 0.4 percent. The index for hospital services increased 1.3 percent, and the physicians' services index rose 0.3 percent; the index for prescription drugs, however, declined 0.2 percent.

The index for motor vehicle insurance continued to rise in January, increasing 1.3 percent, its largest 1-month increase since November 2001. The personal care index rose 0.5 percent; this was its largest increase since January 2015. The used cars and trucks index also continued to rise, advancing 0.4 percent in January. The indexes for household furnishings and operations, education, and tobacco also increased in January.        

A few indexes declined in January, including airlines fares, which fell for the third consecutive month, decreasing 0.6 percent. The new vehicles index decreased 0.1  percent. The indexes for recreation, communication, and alcoholic beverages were all unchanged in January.

*  *  *

The reaction is obvious - bond yield surging (prices tumble) and stocks drop...

Equity Futures are down across the board...

10Y Yields are spiking..

 

The Dollar is spiking...

Rate-Hike odds jumped after the inflation scare... expectations are now for 2 and 2/3rds rate hikes in 2018...

Fed Fund Futures imply a 23% chance of 4 rate-hikes in 2018 - up from 17% yesterday.

As Bloomberg's Richard Breslow warned yesterday:

If the fate of the stock market, and every other global asset for that matter, is so utterly sensitive to a handful of basis points either way on the 10-year Treasury, then it’s in an even bigger bubble than analysts are copping to. And we should cease and desist arguing fundamentals.

He is right of course.