Why Have Stocks Dropped?
What’s in Today’s Report:
- Why Have Stocks Dropped?
- A Story From the Past to Explain My Caution on the Future Economy
- Chart: 10-Year Yield Approaches Key Downtrend Line
Futures declined overnight as the 10-year topped 2.80% with a focus on today’s CPI report but yields have since pulled back and futures are trading effectively unchanged.
Economically, the Japanese PPI was hot (9.5% vs. E: 9.3%) and the U.S. NFIB Small Business Optimism Index missed estimates (93.2 vs. E: 95.0), neither of which are helping trader sentiment today.
Geopolitically, Russia was accused of using chemical weapons in Ukraine, which would be a significant escalation if true, but that information has not been substantiated yet.
Looking into today’s session, focus will be on economic data early with CPI (E: 1.1%) due out ahead of the bell. If the core number comes in below estimates, that could offer the market some relief and spark a reversal higher.
Then attention will turn to the Fed as Brainard speaks over the lunch hour (12:10 p.m. ET) and Barkin is scheduled to speak after the close (5:30 p.m. ET). Brainard’s comments will be closely watched as her hawkishness last week caused rates to surge higher and stocks to selloff.
Finally, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET which will offer some fresh insight to demand for Treasuries amid the latest surge in yields. And if the auction is solid, that could also help yields pullback and stocks rebound.