Stocks soared, and bond yields tumbled after the October CPI report showed an unexpected slowdown in inflation across the board, with core inflation dropping to its lowest level in two years. This led to Fed swaps pricing in 50 basis points in rate cuts for the July 2024 FOMC meeting, while the dollar was clubbed like a baby seal, down 1%, its most significant decline in a year.
Shortly after the release of today's CPI data, Nick Timiraos, often called "Nikileaks," shared a post on social media platform X that confirms the Fed has concluded its hiking cycle.
The October payroll report and inflation report strongly suggest the Fed's last rate rise was in July.— Nick Timiraos (@NickTimiraos) November 14, 2023
The big debate at the next Fed meeting is shaping up to be over whether and how to modify the postmeeting statement to reflect the obvious: the central bank is on hold.
US equity futures erupted after the CPI print - sending S&P500 and Nasdaq futures up as much as 2%. Dow Jones futures were up 1.5%. All three equity futures indexes have traded in a lateral range from 1000 ET (as noted in the graphic).
About 95% of companies in the S&P 500 were green in the session, with the index up 2%.
S&P500 moves above the 100 sma.
Nvidia closed at a record high, matching its longest-ever winning streak.
As stocks soared, so did treasuries - and yields dove across the curve.
Largest rush into bonds since GFC.
This cannot be right, CNBC was telling us that UST 10y yield goes to 13% pic.twitter.com/4hah99PC0o— Michael A. Arouet (@MichaelAArouet) November 14, 2023
Two-year treasury yields recorded the largest one-day drop since the regional banking crisis in March. This is mainly due to the likelihood that a Fed pivot is ahead.
The Bloomberg dollar index collapsed - the biggest daily drop since Nov. 11, 2022.
As for the most important news: The market no longer is pricing in any more rate hikes in December or otherwise, and instead, it is now giving roughly 25% odds to a rate cut in March and has fully priced in two rate cuts by July.
Compare this to yesterday's fed funds futures chart, which gave reasonable odds of a Dec/January rate hike. Well, those are gone.
Fed pivot hopes sparked a 6% jump in Goldman's Most Shorted Index.
The slide in the Goldman VIP Longs/ Most Shorted Index shows funds lost money today as their short positions declined more significantly than the gains from their long positions.
Wall Street's most speculative stocks had no choice but to move higher.
However, most crypto did not join in today's risk rally, except Solana, up 7% on the session.
All-time high on Bitcoin options open interest, now >$16 billion pic.twitter.com/SXVUWib89A— Will (@WClementeIII) November 14, 2023
Gold jumped about 1% to $1,964 an ounce as the dollar dumped.
For more commentary and charts, read Upside panic - shorts carried out on stretchers.