SPX daily
The energy market might be the tail that’s wagging the dog today.
WTI crude is up 1% and flirting with $80 while July natural gas is near $2.75 as US production falls. Oil was as low as $76.70 on Wednesday but has quickly turned around on signs that OPEC+ will extend its production agreement (the meeting was moved to virtual, which probably means it’s a rubber stamp).
As oil prices have climbed today, so have yields. At first equities shrugged that off — perhaps due to options expiration today — but with yields now up 3 to 4.5 bps across the curve, stocks are taking notice. The S&P 500 is down 13 points to 5284 from a high of 5305. To be sure, those are small moves but a sign of some skepticism after a run to records.
I also wonder if there isn’t some reflexivity. Fed funds futures pricing is down to 45 bps this year from 51 bps at the start of the week and that might reflect the strengthening wealth effect from stock markets.
There is also some skepticism about growth.
Tony Pasquariello, Global Head of Hedge Fund Coverage at Goldman Sachs wrote this:
“.. a handful of the biggest money managers I know have recently made strong arguments for ongoing durability in the US economy. if there’s a common thread across them, it’s the momentum behind spending on AI, infrastructure, onshoring and defense. I agree with the broad thesis and will register that GS is calling for Q2 GDP growth of 3.2%, while the Atlanta Fed is predicting 3.6% .. it stands in contrast to the ongoing pessimism I see in the press and hear on the street (specifically regarding the consumer, which I don’t agree with).”
Like it has been for awhile: One economic data point at a time.
