D&D Note (6.14.2022) ~ Markets Now Expecting 75 Basis Point Rate Hike Tomorrow ~
Overnight futures rose 1% but gave back the dead cat bounce in todays session after a choppy up and down day with both the DOW and S&P 500 falling further into the red.
The 10 Year Note hits highest yield in 11 years at 3.48%. The 2/10 Year spread goes back positive after inverting yesterday.
The 30-year mortgage jumps to 6.28% up from 5.5% just last week. Ans this is still before the FED has started selling mortgage backed securities.
Stocks fell today as investors begin pricing in now a 90% chance of a 75bp move at tomorrows FOMC meeting.
The FED has lost a lot of creditability but by doing a 75bp move they could restore confidence by showing they are committed to taming inflation.
Tech stocks found a bit of a bid with the NASDAQ gaining 0.18% today.
The Texas power grid gets stressed as demand breaks record amid a sever heat wave. Sunday the grid reached 75,000 megawatts surpassing previous record of 74,820 megawatts set in August 2019.
Stock Specific News:
Apple signs 10 year deal with Major League Soccer to broadcast all matches on Apple TV+.
Coinbase is cutting 18% of workforce due to the crypto winter.
Real Estate companies announce layoffs as the housing market cools with Compass cutting 10% and Redfin cutting 8% of workforce.
Oracle surges more than 10% after an earnings beat and major increase in demand for its cloud business.
Market Knowledge Tip:
The 2/10 Year spread.
The reason investors watch the spread between the 2 Year Note and the 10 Year Note is that when that spread inverts and goes negative it signals a recession is coming in 7-12 months.
The 2/10 year spread inverted in April and then inverted again yesterday.
Markets tend bottom near that inversion point and then go up post inversion until the recession actually hits which then send stocks crashing.
This is why D&D has a one year outlook on making money in the stock market before going back to cash by end of May 2023. Then we will look to redeploy capital once the market crashes as we go into recession in the second half of 2023.
Closing Markets (as of 1:15pm PST)
DOW down -0.50%
S&P 500 down -0.38% (3,735.48)
NASDAQ up 0.18%
VIX down -3.91%% to 32.69
2 Year Note up 7.68p to 3.43%
10 Year Note up 11.74bp to 3.48%
Oil down -2.233% to $118.23 a barrel.
Gold down -1.283% to $1808.30 an ounce.
Bitcoin down -5.11% to $22,055.25
Ethereum down -3.40% to $1,193.11
~ Dave James / Principal Trader and Market Strategist