Chatty Crashy
February 10, 2023
–Front end trading under enormous pressure with new low settles, testing the lowest levels from November. SFRU3 settled -4 at 9490. Red pack led the way, closing down 10.5. SFRM3/Z3 which had been around -50 a couple of weeks ago, settled -35 yesterday, +4.5 on the day (9483.5/9518.5). Near one-year calendars made new highs, with SFRH3/H4 -57, up 8 on the day (9507/9564). The Fed ‘pivot’ is being moved a bit further back on the calendar, and first half hikes are being priced with more certainty.
–2/10 made a new low at -82.5 (low since 1981). Tens rose 5 bps to 3.681%, wi 30 was 3.75% after a sloppy auction. Headlines this morning lead with Russia cutting oil output in response to sanctions; as of this note CLH3 is nearing $80bbl (79.77, +1.71). Tuesday is CPI, which is now the most important data of the month. Today we get U of Mich Sentiment and Inflation expectations. Though still contained, ten year breakeven (Treasury to inflation-indexed yield) is near the upper end of the recent range at 235 bps. Recent midpoint of b/e at 2.25% is just above the Fed’s 2% target.
–Fun tweet circulating yesterday citing DanGPT (ai chat program) as predicting Feb 15 for the start of a market crash.
https://twitter.com/JesseCohenInv/status/1623377252867051520/photo/2
“…While it is impossible to know for sure what will happen, the conditions are in place for a significant market event to occur and investors should be cautious and prepared for the possibility of a market crash caused by a major geopolitical event involving China.”
End of 2022/start of 2023 lows in SPX are around 3800, while October’22 lows were around 3600 (low print 3491). A “crash” would have to take out last year’s low, a move of more than 10% from here. Ironically, Alphabet was down 4.4% yesterday as ChatGPT threatens Google’s dominant search position; reportedly a question asked of Google’s AI chat was answered erroneously, a catalyst for further selling in GOOGL. Wouldn’t it be poetic justice if AI competition sparks the very crash being predicted?
