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Stocks Puke Back All Post-Powell Gains As Yield Curve Inversion Deepens

Tyler Durden's Photo
by Tyler Durden
Tuesday, Dec 06, 2022 - 09:00 PM

Weakening exports prompted a wider trade deficit in the US, but aside from that, there was little of note to driven today's significant market moves - aside from a realization that Powell really didn't say anything new last week and FOMO is all we have left to rely to ignite momentum and allow 0DTE traders to earn a buck (or lose $10).

Most notably today was the pessimism from several bank CEOs who all suggested varying levels of recession in 2023 (and a weakening consumer).

The yield curve continues to flatten deeper and deeper into inversion with The Fed's most proven recessionary signal (3m10y) now is most inverted since 1981...

Source: Bloomberg

NOTE - it's never inverted without a subsequent recession.

Even more specifically, Jay Powell's favorite curve indicator - 18m fwd 3m bill yield spread to spot 3m bill yield is now notably inverted...

Source: Bloomberg

All the US majors puked hard today with Nasdaq down 2.5% at its worst (Dow was the prettiest horse in today's glue factory). A late day profit-taking snatch put some lipstick on the ugly pig of a day...

The US majors are down in 7 of the last 8 days - the only up-day was during Powell's address last Wednesday.

All of the post-Powell gains have been wiped out rather aggressively...

The S&P tumbled back to its 100DMA and found some support...

At the sector level, Energy and Financials are down the most since before Powell while Utes are holding gains...

Source: Bloomberg

Treasury yields were lower across the curve with the long-end outperforming (30Y -6bps, 2Y -3bps). Since Powell's speech, the long-end is outperforming (30Y -27bps, 2Y -12bps)...

Source: Bloomberg

The 10Y yields is back testing down to 3.50%, the pre-payrolls levels from Friday...

Source: Bloomberg

The dollar extended gains, back above its 200DMA...

Source: Bloomberg

Bitcoin was quiet for once, hovering around $17,000...

Source: Bloomberg

The Bloomberg Commodity Index fell for a 3rd day hitting its lowest since February...

Source: Bloomberg

Brent crude fell back below $80 (for the first time since early January) despite Russia's discussions of a price floor to counter G-7's price-cap...

Source: Bloomberg

WTI crashed to a $3 handle as US boosted its 2023 oil production forecast (in what can only be seen as a politically-driven move given the previous forecast drop)...

NatGas tumbled for the 6th straight day (down almost 30% in that time)...

Source: Bloomberg

Gold was flat on the day, holding just below $1800...

Finally, the US equity market capitalization continues to track the Fed balance sheet (reserves), and Powell shows no signs of reducing QT any time soon...

Source: Bloomberg

Is this the rollover we've been waiting for?

Source: Bloomberg

Maybe that catch down will normalize financial conditions with The Fed's rate-hikes (as Goldman warns "ultimately we think the recent market moves could prove self-defeating")...

Source: Bloomberg

As painful as that maybe, it is perhaps the only thing that will allow Powell to pivot.

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