Gonet: market news from March 17

Dow +1.55%, S&P 500 +2.24%, Nasdaq +3.70%, Russell 2000 +3.08%, SOX +5.03%, Eurostoxx +4.05%, SMI +1.87% .

Wall Street listens carefully to Jerome Powell, who doesn’t seem to convince her. Convince her of what? I return to the fact that the scenario presented by the Fed is credible. The US Federal Reserve raised its key rate by 25 basis points, as expected. Other than James Bullard, who wanted 50 basis points, everyone is in favor of 25 basis points in the FOMC. Six additional increases are expected this year, four more next year, and none in 2024, giving us three more increases over the 2022-2024 period than last forecasts. In terms of the size of its balance sheet, the Fed is implicitly telling us that it wants to speed up its drawdown from the second quarter of 2022, we can envisage starting at its meeting in May. On the growth side, the Fed is lowering its forecast for 2022 while raising PCE (Personal Consumption Expenditure) expectations. Also discussed is Russia’s invasion of Ukraine, which, according to the issuing institute, could accelerate inflation (oil and supply chain).

Understandably, the term “stagflation” seems less and less chimerical. And this is where the bottom hurts (FRS). Jerome Powell is so busy trying to convince the Federal Reserve to hit hard to keep inflation out that the market believes it is exactly 35 minutes. 35 minutes is the time between 7:00 PM, the Fed’s announcement, and 7:35 PM (I did math+ in elementary school), when stocks go into Space-X mode after returning to earth. As of 19:35, market rate hike expectations are declining. The thought quickly enters the trading floors that the Fed will not be able to apply this calendar as it sees fit. The inconsistencies in his forecasts, and especially the almost desperation with which Jerome Powell insists on the strength of the economy, point to just that.

As a result of the race, forward rates now provide for almost 3 rate cuts over the next three years. I wrote “cons”. And what could be sweeter to the ears of the stock market than the idea of ​​cutting rates? Therefore, it is quite logical that the indices end their day at the high of the session. Remember that if the expectations of the forward market come true, this is rather very bad news for the economy, and hence the forward market for equities. But we will see that later, in the joyous parallel realm of action, we prefer to savor the moment…

The S&P500 Index (SPX) is making its biggest two-session gain since April 2020. I wrote above, initially, more or less everything that is risky recedes after 19:00, and more or less everything returns to normal after half an hour, even gold and bitcoin, that is, if this market is “lost in translation”. Moreover, volatility remains high, with VIX (SPX volatility) falling 10% to 26.67, but that level still and always suggests some potential for sharp and sharp moves north or south. Whatever the case, the market is clearly back in ‘risk’ mode and is making nice spins from value stocks to growth stocks (we’ll see bond rates spike later, one at a time, please). I see clear cyclical elements in this market, led by the consumer and financial sectors, followed in particular by technology. And who do we find as the ugly duckling of the day? I give you a thousand, an energy that seems much less popular lately, the market is wrong. Defensive actions are also taking a monumental soup, has the market already advanced? Not so fast…

In terms of Chinese internet stocks listed on Wall Street, for the bulls an open house and champagne galore, the bears are asked to come back another day, and the KWEB ETF goes into orbit, soaring 40%! We’re seeing massive short coverage on everything China-related, only longs are back in the dance, but through the back door, China’s unexpected desire to take care of its stock market seems to work wonders. In this regard, will this new position of Beijing be a “game changer”? But why not? To keep a close eye on in any case…

I almost forgot, yesterday at the close of the NYSE the percentage of buyers exceeded $ 2 billion, the bulls, it seems, have not finished yet.

On the bond front, which is often more mature and measured than its equity little brother, the battle is heating up. The short part of the US yield curve is moving aggressively, and the spread between 2- and 10-year bonds has narrowed to 21 basis points. The 5 to 10 year period is moving into somewhat negative territory, the bond market signal is that if the Fed executes its program it will weaken the US economy.

Joe Biden accuses Moscow of committing “atrocities” in Ukraine, promises to send drones as part of military aid to the besieged country, and calls Vladimir Putin a “war criminal”. According to the city council, a Russian plane is bombing a theater in Mariupol, where hundreds of people have taken refuge. The airstrikes also hit the swimming pool building that served as a shelter, as well as a convoy of evacuated civilians, Ukrainian officials said. The G7 foreign ministers will meet online today to discuss Ukraine. NATO defense ministers are meeting in Brussels to discuss ways to strengthen the eastern members of the alliance and prevent the consequences of war.

Another lively news today, between the final version of the European CPI for February (11:00), the decision of the Bank of England on its rates at 13:00, then in the United States the Philadelphia Fed March index, February new weekly jobless claims and building permits (13:30), then February industrial production at 14:15.

Adecco: Exane BNP Paribas goes from neutral to worse, targeting 39 francs. Assicurazioni Generali: Kepler Cheuvreux moves from buying to holding, targeting 20 euros. Holcim: Credit Suisse cuts its target price from 65 to 58 francs. Nestlé: RBC maintains sector performance, target price reduced from 109 to 96 francs. Renault: Exane BNP Paribas is moving from superiority to neutrality, aiming for 28 euros. Sika: JP Morgan starts the continuation from a neutral position, aiming for 333 francs. ThyssenKrupp suspends forecasts. Netflix wants to try charging for sharing passwords.

In Asia this evening and this morning, indices follow in the footsteps of Europe and Wall Street, Tokyo added 3.46% to the call, Hong Kong gains an additional 6.58% (definitely the power of words (in this case from Beijing) remains above the scramble, the situation is oversold two days ago too), Shanghai rose 1.4% and Seoul rose 1.33%. SPX futures held its breath and traded even as Europe opened 0.2% higher after yesterday’s 4% jump. Gold is back to $1936 an ounce, oil remains below $100/bbl WTI Light Crude and the dollar is falling against the euro with the pair trading at 1.1049 this morning.

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