Stocks & Bonds Dump On ‘Good’ Jobs News, Rate-Hike Odds Jump

Futures chopped sideways to higher overnight then a triple whammy of better than expected labor market data (Challenger layoffs, ADP, and claims) sent stocks and bonds reeling as market expectations for The Fed’s rate-trajectory shifted hawkishly…

Terminal rate expectations are rising…

Source: Bloomberg

Expectations for rate-cuts in H2 2023 are fading…

Source: Bloomberg

Stocks bounced briefly on unusually dovish-sounding comments from The Fed’s Jim Bullard who noted “2023 may be a deflationary year… with rates close to restrictive.” And then later in the day, Bullard went hawkish again, saying that “a strong job market means it’s a good time to fight inflation.”

Bullard is right, the labor market is dramatically decoupled (positively) from tightening financial conditions…

Source: Bloomberg

And that all dragged stocks lower overall with Nasdaq leading the way…

Bed, Bath, & Beyond was battered to 30 year lows on ‘going concern’ fears…

Source: Bloomberg

Silvergate Capital was slaughtered on outflows…

Source: Bloomberg

The short-end of the yield curve was smashed higher in yield today as the long-end was modestly lower in yield (2Y +9bps, 30Y -1bp). On the week, 2Y Yields are higher while the rest of the curve is lower…

Source: Bloomberg

All of which means the yield curve has flattened (deeper into inversion) this week

Source: Bloomberg

The dollar rallied up to one-week highs today (helped by EUR weakness overnight)…

Source: Bloomberg

Bitcoin chopped around relatively flat on the day…

Source: Bloomberg

Oil prices ended higher after some notable intraday volatility…

Dollar strength also weighed on gold, but the precious metal found support at $1830…

Finally, we note that overnight saw a landmark event in recent financial history…

Source: Bloomberg

Fore the first time since 2014, there are no negative-yielding bonds globally.