In his Daily Market Notes report to investors, Louis Navellier wrote:
50BPS Dead
CPI was on forecast, the banking crisis is calming, and stocks are having a major rebound.
Most of the names taking major heat yesterday are bouncing strongly this morning. While the indexes are still negative for March, this is the first up day in a week and it’s a welcome relief given the high volatility we’ve been through. The VIX has fallen almost as fast as it rose, though still above 23. While interest rates are rising materially, they remain far below recent highs.
Q4 2022 hedge fund letters, conferences and more
The February CPI numbers were essentially on forecast with the headline number +0.4%, 6.0% y-o-y, and the Core CPI +0.5%, a tick over the 0.4% forecast. The next big question is will the Fed blink and pause given the banking turmoil?
Several market commentators feel that the banking problem was a result of the rapid increase in rates by the Fed finally coming home to roost and that they should pause before further damage occurs.
But given the y-o-y inflation rate of 6% is far away from their 2% goal, it wouldn't surprise anyone if we see another 25bps next week, though the likelihood of a 50bps increase, a 50/50 bet just a week ago, appears dead.
Interestingly, BitCoin has rallied from $20K to $26K in just a couple of days, the highest level since May'22 on its way down from the mid-$40Ks, a clear risk-on signal. High Yield bonds have also bounced. On the commodity front, crude oil is down to below $74, near the low for the year, and gold is down a few dollars but still up almost 5% in a week.
Bad News is Good Again
The focus remains on what the Fed will do next week, with the US 2-year yield bouncing strongly off a 3.83% bottom to 4.35% in just a few hours, after an unprecedented downward volatility from 5.08% only a week ago.
Here we are again, where bad news, in this case, the unexpected banking crisis, might be good news, by forcing the Fed's hand to restrain their plans for further tightening to bring inflation down sooner rather than later. That said, the very high volatility we've just experienced is uncomfortable for investors, especially when P/E multiples are relatively high.
If the Fed rhetoric next week isn't somewhat dovish and the 2-year yield motors back to 5% in the short run, today's rally may be overly optimistic.
Coffee Beans
Through the end of February, lithium-ion batteries had already caused 30 fires in New York City, killing two people and injuring 40. In 2022, the FDNY attributed 216 fires to faulty batteries, resulting in calls for better regulation and safety standards. Source: Statista. See the full story here.
