Did yesterday kill the buy on dip mentality?  Wednesday markets soared by the greatest amount since May 2020.  Yesterday equities plunged by the greatest amount since June 2020.  Bloomberg writes 97% and 98 % of S & P 500 and NASDAQ 100 companies traded lower, respectively.

At the close the NASDAQ was down 5.0%, the Dow Jones off 3.1% and the S & P 500 fell 3.5%.

The accepted catalyst for the selloff was the increase in longer dated Treasury yields, perhaps the result of the Fed’s declaration that it has no intentions to increase the overnight rate by 75 basis points.  Such an increase would increase the odds of taming the greatest inflationary pressures in forty years.  The 10 and 30-year Treasury increased significantly in yield and are now at the highest levels since 2018.

The question at hand will longer dated Treasuries follow the same trajectory of mortgage rates which are now at the highest level since August 2009 with the average yield around 5.80% versus about 3% in October?

The two-year Treasury or the instrument most sensitive to monetary policy did rise nominally in yield but are about 15 basis points lower in yield than pre FOMC meeting levels.  The volatility in the typically staid two-year Treasury is incredible far eclipsing any period that I am aware of in my 36 years of trading debt.

Today is the release of the all-inclusive BLS employment report.  Little attention was paid to yesterday’s release of the first quarter productivity data which indicate output decreased at a 7.5% annual rate from the previous three months, the greatest decline since 1947 as unit labor costs climbed at 11.6% rate in the first quarter according to the Labor Department.

Analysts are expecting a 3.5% unemployed rate, a 380k and 374k increase in non-farm and private sector payrolls, respectively, a 0.4% increase in average hourly earnings, a 34.7-hour work week and a 62.5% labor participation rate.

Last night the foreign markets were down.  London was down 0.78%, Paris down 1.20% and Frankfurt 1.16%.  China was down 2.61%, Japan up 0.69%  and Hang Seng down 3.81%.

Dow and NASDAQ futures are down 0.25% and 0.58%, respectively ahead of the jobs data.  Oil is up about 3%.  The markets may focus on the wage data for such is adding to inflationary pressures.  The 10-year is off 12/32 to yield 3.10%.


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