Soft-Landing-Seers Slayed Amid Macro-Meltdown: Stocks Dump, Dollar Jumps

The day did not start off well at all as The ECB hiked rates (as expected) but had a very hawkish tone to its outlook, cutting growth and hiking inflation forecasts. And then it got worse with Empire Manufacturing tumbling, a big miss for retail sales, worsening continuing claims data, worse than expected Empire Fed sentiment, a big drop in Industrial Production and Manufacturing output, and finally the weakest growth in business inventories since April 2021. Additionally, the only thing that beat was initial claims… which is hawkish for The Fed.

Source: Bloomberg

And of course, there’s the fact that the Philly Fed just admitted US job gains are dramatically overstated.

Rate-trajectory expectations shifted more hawkishly on the day…

Source: Bloomberg

Stocks took the brunt of the reality check with longest-duration big-tech clubbed like a baby seal. Selling pressure started as Europe opened overnight then accelerated on the dismal macro data. We do note that stocks bounced a little in the mid-afternoon on the Philly Fed job lies report. But by the close the selling (ahead of tomorrow’s massive Op-Ex) continued…

Small Caps have almost erased the entire ‘soft-landing/pause/pivot’ rally from November’s CPI…

The S&P broke below its 100DMA, Russell 2000 and Nasdaq broke below their 50DMA. The Dow remains well above its technically important levels for now…

Treasuries were very mixed today with the long-end dramatically outperforming amid a major curve flattening (30Y -5bps, 2Y +4bps)…

Source: Bloomberg

The 10Y Yield fell back to the post-CPI lows…

Source: Bloomberg

The yield curve (2s30s) flattened (inverted more) to unchanged on the week (erasing the CPI steepening)…

Source: Bloomberg

The dollar surged back higher today, erasing all the post-CPI losses…

Source: Bloomberg

The euro pumped and dumped around The ECB’s hawkish statement…

Source: Bloomberg

Cable tumbled today after BoE hiked rates 50bps (like everyone else) having reached its highest since June…

Source: Bloomberg

Bitcoin extended its slide from yesterday…

Source: Bloomberg

Gold dropped back below $1800 after yesterday’s surge up to $1835…

Oil prices slipped lower on the day amid a stronger dollar and weaker macro data with WTI sliding but holding just above $76

Finally, did Powell just unleash this reversion to reality?

Source: Bloomberg

To re-tighten financial conditions to policy direction…

Source: Bloomberg

That really would upset the ‘soat-landing-seers’.