Rate-Hike Odds Spike After Strong GDP; Bonds & Big-Tech Battered

A big upward revision to Q1 GDP hid the extent of the weakness in pending home sales data and sent US macro surprise index back near recent cycle highs…

Source: Bloomberg

“This is not the disinflationary slowing economy you’re looking for…”

This sent rate-hike expectations spiking higher with around a 50% chance of two more rate-hikes holding into year-end…

Source: Bloomberg

And dragged Treasury yields higher across the curve (with the short-end underperforming – 2Y +17bps, 30Y +10bps) pushing them all notably higher on the week…

Source: Bloomberg

…smashing the yield curve (2s30s) back near pre-SVB lows – screaming recession and/or Fed policy error…

Source: Bloomberg

With 2Y Yields back up near cycle highs right before the SVB collapse…

Source: Bloomberg

The rise in yields this time smacked the long-duration tech stocks, and the ubiquitous rotation into value (banks helped by stress test results at the margin) occurred once again with Nasdaq the day’s biggest loser and Small Caps biggest gainer. The Dow and S&P managed gains…

AAPL was unable to get up to $3 trillion market cap once again (finding resistance at $190.00 today)…

The divergence between yields and the Growth/Value rotation remains extreme…

Source: Bloomberg

Overdone? Is it time for Value/Small Caps to outperform Growth/Nasdaq?

The dollar hit near 4-week highs…

Source: Bloomberg

Bitcoin rallied today, extending its bounce of $30,000, helped by news that Fidelity is pitching a Spot Bitcoin ETF…

Source: Bloomberg

Oil prices managed modest gains, with WTI testing back above $70 – but unable to hold it…

Gold ended lower on the day but well off its spike lows (which tested down to near $1900 and bounced)…

Finally, we note that Nomura’s Charlie McElligott asked yesterday (reflecting oin the equity market meltup) – So what would it take to blow this thing out?  

His answer may well be worth paying attention to this morning…

Just spitballing…

Perhaps what is required (easier said than done!) is a proper “Correlation 1” event where the current dispersion wave reverses, especially if Grosses keep growing – potentially requiring some sort of AI crunch from the Long side (earnings expectations mania overshoots reality? – seems too early for that just yet)…

…or maybe from the Short-side, where US economic data does indeed see that aforementioned “animal spirits” trade and actually reaccelerates to such an extent that markets either begin adding-in fresh terminal rate…

…OR where heavily-short economically sensitives begin trading “early cycle” and get grabbed-into / painfully.squeezed.

No one was expecting that kind of ‘animal spirits’ growth? And The Fed can’t stand for that.

But could The Fed handle that kind of reversal?