Good Tuesday AM,
Dan Rawitch had a good commentary today:
“The Bank Pain for the MOMENT appears to have subsided. I am not convinced this will not come back in the near future as more things break. The Fed has ALWAYS raised rates until something breaks. This is true 100% of the time. Well, they broke something which could cause further collapse of our banking system without additional help. Historically each time the Fed breaks something, they pivot away from their rate increase strategy.
For now, the Rally is pausing and in fact giving back some of yesterday’s gains. It is tough to say at the moment if the Rally will resume. Sadly, CPI came in hotter than expected at the Core level. This adds to the Feds problem. They must choose between financial instability and inflation. Both are bad choices. The ten year bond is sitting on the Fibonacci level I cautioned yesterday that we would revisit after dicing through it yesterday. As I said yesterday it was important that we close below 3.50% and we did not. The MBS has now closed the gap up created yesterday. Now we will either Gap and Go or Gap and Crap. At this point I think we have more risk to the downside, unless of course we see further cracking of the banking system.”
The news keeps coming this week.
Tomorrow is PPI and Thursday is Retail Sales. Both of them can and will move markets as they set us up for next week’s Fed meeting. A quick primer on the Fed meeting below…
Last week, investors were wondering whether the Fed would raise interest rates at its next meeting by a quarter-percentage point, as officials did last month, or by a half-point, as they did in December. Following the bank failures, investors in interest-rate futures markets saw a greater than one-in-three chance that the Fed would hold rates steady at its meeting next week, according to CME Group. Fingers crossed for the Fed to pause. I am not ready to call that ball yet, but if they do pause we will see a quick improvement in interest rates.
Please remain safe and stay healthy, make today great!