Data showed producer inflation data of 0.0% last month, compared with expectations of a 0.3% increase. Excluding food and energy, the PPI fell 0.1%, the first monthly decrease since July. The core was up 3.4% from a year earlier.
However, categories that inform the Fed’s preferred inflation measure—the personal consumption expenditures price index—were largely firmer.
The bond market took its cue from this observation sending yields marginally higher across the curve, causing a nominally steepening curve.
All markets were again spooked by the President’s tariff proposals, which occur to change on a moment’s basis.
Bloomberg writes it took 16 trading sessions for the S & P 500 to fall into correction territory—defined as a decline of at least 10%–the seventh fastest in history. Three of the seven fastest drawdown of this magnitude happened under Trump—in 2018 (ending of QE and change in monetary policy), 2020 (COVID) and now.
Perhaps bond legend Mohamed El-Erian placed today in the proper perspective when he stated
You are seeing a complete upending in virtually every single consensus trade that was common at the beginning of the year, everything in stocks, in bonds, in currencies…we have had a complete upending of the conventional wisdom.
Perhaps the most significant part of the above quote is the tacit acknowledgment of “no other side of the trade,” given that virtually all have adopted similar and un opposing trades.
This is non too evident as the massive concentration of wealth in a handful of companies in only one sector. Where is the other side of the trade to offset risk???
What will happen today?
Last night the foreign markets were up. London was up 0.58%, Paris up 1.0% and Frankfurt up 1.42%.. China was up 1.81%, Japan up 0.72% and Hang Seng up 2.12%.
Dow and NASDAQ futures are up 0.5% and 1.0%, respectively, perhaps the result from the threat of a government shutdown receded. The 10-year is off 8/32 to yield 4.31%.
