Dollar Dumped After Soaring CPI, Crypto & Crude Jump

Hot CPI and hawkish FedSpeak were just too much for BTFDers to hold on to gains. Highest headline CPI in 39 years, 9th straight month of real wage loss, and Fed’s Bullard going full-hawktard…

• *Fed’s Bullard: Four Rate Rises in 2022 Now Appear Likely –WSJ

• *Bullard: 2021 Liquidity Can Be Removed With Likely Little Disruption –WSJ

• *Bullard: Early Start to Rate Hikes May Avoid More Hawkish Rate Path –WSJ

• *Bullard: March Rate Rise Is Very Likely Amid High Inflation –WSJ

…and everyone knows you never go full hawktard…

Small Caps underperformed today, but all the majors followed a similar track – rallying immediately on the CPI print, all dumping at the cash open, BTFD’ers piling in as Europe closed, then from around 2pm ET (margin calls?), things faded. Nasdaq was the best performer with the Dow holding on to unchanged and S&P small green…

For context, the S&P has rallied in the first 30 minutes after the release in 9 of the last 13 months on CPI day (with no co-movement link to whether it was a beat or a miss), but as the chart below shows, that initial surge has (on average) tended to normalize…

Source: Bloomberg

Also of note, today was the weakest dollar response on a CPI day since Feb 2018…

Source: Bloomberg

Nasdaq bounced perfectly off its 200DMA, rallied all the way up to its 100DMA, then faded today…

Goldman’s Sentiment indicator is at the lowest level in 86 weeks… back to its worst since March 2020’s collapse…

The Dollar was monkeyhammered lower again today, tumbling to two-month lows and testing its 100DMA…

Source: Bloomberg

In bond-land, it was mixed today with the belly outperforming and the wings weakest (2Y and 30Y +2bps or so, 5-10Y -1bp)

Source: Bloomberg

But, things are changing, with 10Y yields down a couple of bp to 1.72% (and over 8bps off the 1.80% top we saw earlier this week).

Source: Bloomberg

Real Yields jumped higher on the day…

Source: Bloomberg

Goldman’s Chris Hussey suggests a myriad of factors may be behind a top forming in 10-year bond yields, including:

(1) a potential expectation that we will soon see a peak in US inflation (so the next trade is for easing pressures),

(2) the notion that several Fed funds rate hikes are already priced into markets, and

(3) the relative attractiveness of US yields relative to Europe and Japan (a factor that has been in the markets for years, putting a cap on long-term US yields).

Also today, we are seeing more signs that the latest virus wave may be close to a peak — an event that could provide some relief as supply chains reopen

Cryptos were also bid today with Bitcoin tagging $44k…

Source: Bloomberg

And Ethereum rallied up to $3400…

Source: Bloomberg

Bitcoin’s correlation with global stocks has surged back to its highest since Oct 2020…

Source: Bloomberg

The dollar was clubbed like a baby seal back into the red for the year…

Source: Bloomberg

Gold continued its rebound, nearing $1830 once again…

WTI surged ahead today, topping $83 for the first time since early Nov 2021…

NatGas surged higher today amid arb-demand from Europe and a sudden cold-weather front. The 13% jump is the biggest daily spike since Nov 2018…

Finally, given the major rebound in oil prices, Biden’s SPR-release improvement in the retail gas price is likely over…

And that will likely mean this chart moves lower…

Get back to work, Mr.Biden.