Soft CPI Sparks Bond-Buying Bonanza, Meme Stock Meltup, Gold Gains As Dollar Pukes

The cooler-than-expected CPI print was all the doves and bulls needed today and while the odds of a July hike were unchanged (pretty much a lock), expectations for Fed rate changes for the rest of the year dropped notably, erasing the hawkish shift after the strong GDP revision at the end of June…

Source: Bloomberg

Curvature’s all-knowing STIRs guru, Scott Skyrm noted the following:

Fed officials say there are two 25 basis point tightenings left on the table. The market is only pricing one, with about a 20% change of a second.

The market is pricing an 89% of a tightening on July 26 and expects fed funds to peak at 5.38% in November.

Given that the weak CPI number didn’t even move the needle on the July rate hike, it means the real question is whether the last rate hike occurs in September or November or not.

Equities loved it “because this means The Fed is almost done” – seemingly forgetting that the cost of capital is still 500bps higher than it was (at least) and The Fed is adamant that it won’t be cutting any time soon. Small Caps and Nasdaq were the biggest gainers today as The Dow lagged…

The short-squeeze continues with the ‘most shorted’ basket up a stunning 19% in the last 10 days…

Source: Bloomberg

Which has helped send ‘Meme Stocks’ up 15% in the last 10 days… is that really what The Fed wants?

Source: Bloomberg

Un-profitable tech stocks are up 13% in the last 4 days… The Magnificent-Seven stocks are flat…

Source: Bloomberg

It wasn’t just stocks that were panic-bid, Treasuries surged with yields plunging across the curve (with the short-end outperforming – 3Y -17bps, 30Y -6bps). On the week, the belly has seen the biggest decline in yields (but the long-end is still down 10bps)…

Source: Bloomberg

The 2Y yield is perhaps the most notable since it ran the stops above the pre-SVB yield highs and was unable to hold above 5.00%, it is now down 40bps from its highs

Source: Bloomberg

The yield curve (5s30s) steepened notably today – pushing back up to un-inverting…

Source: Bloomberg

The dollar puked today – its biggest daily drop since Jan 2023 – down for the 4th straight day (the biggest 4-day drop for the dollar since Nov 2022). The Bloomberg Dollar Index is at its lowest since April 2022…

Source: Bloomberg

Dollar’ losses are Euro’s gains – which closed at its highest since March 2022 – completely decoupled from its macro data…

Source: Bloomberg

Bitcoin was pumped (up near $31k) and dumped…

Source: Bloomberg

Oil continued its rebound with WTI trading above $76 – the highest since the first day of May…

Gold also extended its recent gains, topping $1960 (futs) today – the highest in 3 weeks…

Finally, this is probably nothing, right?

Source: Bloomberg

When did credit traders know anything anyway?