Markets remain in a defensive position ahead of CPI numbers

There isn’t a whole lot of news on any particular trading day that could push both stocks and (oil) commodities down, but news about the resurgence of Covid in Shanghai, China – and governments central authorities plan to lock down certain regions, creating a drag on the economy. China has had a zero tolerance policy regarding Covid outbreaks, which in these times of Omicron and other milder variants has started working against them.

Partly that, and partly lingering inflation concerns here at home, drove the indexes lower for the day: the Dow Jones was -413 points or 1.19%, the S&P 500 was -1, 69% and the Nasdaq took the bulk of the sale today, -299 points or -2.18%. The day got off to a bad start for the tech-heavy Nasdaq, and while the Dow Jones fell in the last hour of trading, it was the Nasdaq that still had the worst. The small cap Russell 2000 fell -0.71% on the day.

We also saw further expansion in the spread between 2-year and 10-year bond yields that had reversed for much of the past week, raising fears of a recession that will continue this week. The 10-year has been soaring lately, now +2.784% versus +2.506% on the 2-year – more than the quarter-point buffer that economists usually consider when trying to determine reversals. It seems that the promise of further rate hikes over time is pushing expectations higher on the 10yr.

In France, a run-off election between President Emmanuel Macron and far-right nationalist Marine Le Pen illustrates the evolution of politics in France in recent years. Le Pen – daughter of former far-right National Front leader Jean-Marie Le Pen – has never, until now, been seen as a fringe candidate to lead one of Europe’s biggest countries. . Yet the ability to enter a runoff with Macron, even if she doesn’t win in the second round, demonstrates the great strides the French right has made in national politics lately. Don’t expect the proto-fascists in this country to give up now.

tomorrow Consumer Price Index (CPI) the numbers are expected to grab market headlines before the big banks release their first-quarter results from Wednesday. Last time out, the headline year-over-year figure hit a 40-year high of 7.9%, and tomorrow we should see the March numbers jump another half a percentage point. Regardless of how close 8.4% is to that number, expect the 50 basis point rate hike to occur at the Fed’s next policy meeting early next month – no doubt.

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