DJIA39807.37 47.29
S&P 5005254.35 5.86
NASDAQ16379.46 -20.06
Russell 20002120.20 4.00
German DAX18504.51 29.45
FTSE 1007952.62 20.64
CAC 408205.81 1.00
EuroStoxx 505082.85 0.10
Nikkei 22540168.07 -594.66
Hang Seng16541.42 148.58
Shanghai Comp3010.66 17.52
KOSPI2745.82 -9.29
Bloomberg Comm IDX99.49 1.18
WTI Crude-fut87.00 1.32
Brent Crude-fut83.15 1.80
Natural Gas1.76 0.05
Gasoline-fut2.72 0.04
Gold-fut2238.40 26.20
Silver-fut24.92 0.23
Platinum-fut921.10 11.20
Palladium-fut1021.50 26.00
Copper-fut400.70 -0.30
Aluminum-spot1815.00 0.00
Coffee-fut188.85 -1.80
Soybeans-fut1191.50 -1.00
Wheat-fut560.25 12.75
Bitcoin70444.00 -207.00
Ethereum USD3561.68 -1.67
Litecoin94.31 0.05
Dogecoin0.22 0.00
EUR/USD1.0812 0.0018
USD/JPY151.28 -0.03
GBP/USD1.2633 0.0002
USD/CHF0.9010 -0.0002
USD IDX104.56 0.19
US 10-Yr TR4.206 0.01
GER 10-Yr TR2.305 0.013
UK 10-Yr TR3.946 0.01
JAP 10-Yr TR0.721 0.015
Fed Funds5.5 0
SOFR5.33 0.01

Latest News

Evening Brief – 05.04.23

At about 3.40%, the 10-year US Treasury note is now well below its 52-week high of 4.33%, which was hit in October 2022. The drop in yield, even as the Fed has continued to raise short-term rates, suggests investors are preparing for a recession in the near term as well as ongoing anxiety about the financial system’s stability in light of recent bank failures.

In fact, the Fed’s preferred recession rate-spread indicator – the 3-month/18-month forward – is now flashing red, implying a 94% probability of a recession within the next year.

That said, market participants seem too complacent when it comes to risk assets given this cocktail of higher interest rates, quantitative tightening (which probably has more of an impact on risk assets than rate hikes or cuts) and credit contraction. Under these conditions, one can expect higher default rates on lower quality fixed income securities, perhaps by the end of the year.

Investors should be going up in quality in bond portfolios. When bonds are defaulting, or spreads are widening on the lower tiers of credit it makes for a very difficult bullish case to own equities. Risk needs to be very carefully managed right now.

Fed Chair Jerome Powell seems to be running a “separation policy”, where the central bank can focus on monetary policy on one hand and regulatory policy on the other hand. Given recent comments from former Boston Fed president Eric Rosengren and former Dallas Fed president Robert Kaplan, they likely have a problem with this approach. Potentially further raising interest rates or simply keeping them high while the banking system continues to have problems can cause major headaches for the financial markets.

The quarter-point rate hike on Wednesday did not help the banking system. It made some of the marks (Treasury holdings by many of the regional banks) even more underwater. The likelihood of a credit crunch just increased.

Connect

Inside The Story

About Joe Palmisano

Joe Palmisano is Editorial Director for Connect Money, where he brings nearly three decades experience of market insights as a financial journalist, analyst and senior portfolio manager for leading financial publications, advisory firms, and hedge funds. In his role as Editorial Director, Joe is responsible for the selection of content and creation of daily business news covering the financial markets, including Alternative Assets, Direct Investment and Financial Advisory services. Before joining Connect Money, Joe was a financial journalist for the Wall Street Journal, regularly publishing feature stories and trend pieces on the foreign exchange, global fixed income and equity markets. Joe parlayed his experience as a financial journalist into roles as a Senior Research Analyst and Portfolio Manager, writing daily and weekly market analysis and managing a FX and US equity portfolio. Joe was also a contributing writer for industry magazines and publications, including SFO Magazine and the CMT Association. Joe earned a B.S.B.A. in Finance from The American University. He holds the Chartered Market Technician (CMT) designation and is a member of the CFA Institute.