North American News
Ugly close: S&P 500 falls into a bear market in 4% decline
- The Nasdaq is now 33% from the high
It was a bloodbath in US stocks with the grand finale coming late in the day on a WSJ report with their Fedwatcher speculating on a 75 basis point hike on Wednesday.
It was ugly right from the start and never really improved.
- S&P 500 -153 points to 3746, or -3.95%
- Nasdaq -4.6% — lowest close since November 2020
- DJIA -2.9%
- Russell 2000 -5.1%
The S&P 500 closed down 21.8% from the record on January 4. That confirms a technical bear market in the main index. Stocks hit fresh session lows a few minutes before the close and then bounced slightly in the final minute of trading.
The S&P 500 has now completely erased the 2021 gain.
US 2s/10s are a shade away from inversion on 75 bps speculation
- The front end is blowing out
US 2-year note yields are now up 31 basis points on the day to 3.35%.
With 10-years up 23 bps to 3.38%, the spread is just 3 basis points. The 2s10s spread briefly inverted last year and is threatening to do so again. The bond market is looking increasingly disorderly and some of the rumblings out of MBS and junk are terrifying. This is not the look of an orderly market.
Commodities
Gold Price Forecast: XAU/USD tanks from daily highs and trades below the 200-DMA at around $1820s
- Friday’s US hot inflation reading triggered a flight to safe-haven currencies like the greenback, and precious metals fell.
- The 2s-10s US Treasury yield curve inverted during the day as a recessionary scenario looms.
- The CME FedWatch Tool shows that the odds of a 75 bps increase in the June meeting lie around 34%.
- Gold Price Forecast (XAU/USD): A daily close at around $1820 to open the door towards $1800.
Gold spot (XAU/USD) slides to a new monthly low near the $1820 figure on Monday, as US Treasury yields skyrocket, propelled by Friday’s hotter than expected US inflation numbers, ahead of the US Federal Reserve June meeting, in which investors have priced in a 50 bps increase. At the time of writing, XAU/USD is trading at $1826.60, down near 2.20%.
Pessimistic sentiment triggered a flight to safe-haven assets, except Gold
Risk-aversion dominates Monday’s session. European and US equities are plunging as a recession looms, spurred by global central banks, which forecasted inflation as transitory, falling behind the curve. Market participants are flying toward safe-haven assets, as reflected by the greenback. The US Dollar Index, a measure of the greenback’s value vs. six currencies, advances 0.80%, trading at fresh 2-decade highs around 105.027.
In the meantime, Gold remains trading heavy after reaching a daily high near $1880, weighed by higher US Treasury yields. The 10-year benchmark note rate jumped to multiyear-highs, to levels last seen in 2011, at around the 3.314% threshold, up by 15 bps.
Meanwhile, the short-end of the yield curve, the 2s-10s, inverted during the day on concerns that a higher Federal Funds Rate (FFR) might trigger a recession, as the US central bank battles inflation readings near 9%, not seen since 1981.
Elsewhere, some commercial banks around the globe begin to price in a 75 bps rate hike on Wednesday, like Barclays. However, most analysts expect the Fed to hike 50 bps as they aim to keep its credibility intact, though it could open the door for higher rate increases in July and September.
The CME FedWatcht Tool shows the odds of a 75 bps rate hike at 34.3% while fully pricing in a 50 bps increase.
WTI crude oil futures settle at $120.93
- Up $0.26 or 0.22%
The price of WTI crude oil futures are settling at $120.93. That’s up $0.26 or 0.22%.
The high price reached $122.25. The low price reached $117.47.
Looking at the hourly chart, the price moved back above the 100 hour moving average at $120.60. The last corrective move did find support buyers against that level. Stay above is more bullish. Move below and there could be a rotation back to the downside.
EU News
European equity close: Not a pretty picture
- Closing changes for the main European bourses
- Stoxx 600 -2.4%
- UK FTSE 100 -1.5%
- German DAX -2.5%
- French CAC -2.6%
- Italy MIB -2.8%
- Spain IBEX -2.4%
Other News
WSJ Fedwatcher speculates about a 75 basis point hike
- This could be a market mover
WSJ Fedwatcher Nick Timiraos is just out with a new report previewing the FOMC.
“A string of troubling inflation reports in recent days is likely to lead Federal Reserve officials to consider surprising markets with a larger-than-expected 0.75-percentage-point interest rate increase at their meeting this week,” he writes.
The report is speculation but it taps into the old-style Fed leaks.
There’s a spike in Fed fund futures implied probabilities for Wednesday’s meeting coming with this, with a 57% probability of 75 bps now.
The report notes that Fed officials said their 50 bps signals were conditional on the outlook. Since then the CPI report was hotter than expected.
“That data could alarm Fed officials because they believe such expectations can be self-fulfilling,” Timiraos wrote.
ukraine agricultural minister: Ukraine has lost 25% of its arable land
- Not good news for global food supply
The Ukraine agriculture minister says that Ukraine has lost 25% of its arable land due to the war.
Ukraine is a major producer of wheat, sunflower seed oil, cereals, and other agricultural products. Ukraine was the fifth largest grain producer in 2020 and together with Russia make up around a quarter of global wheat production.
Cryptocurrency News
Bitcoin dropped under US$25K as the Celsius “pause” news spreads
The Celcius Network rated itself very highly:
- Buy, swap, earn, borrow and send crypto – all in one app, with zero fees.
Garnered circa US$12bn in customer assets. From 1.7 million users.
The collapse has sent BTC/USD to $22K