Equity market jitters
June 29, 2022
–Yields were little changed yesterday but stocks were under pressure with SPX falling 2%. Ten year yield essentially unchanged at 3.198%. TYU settled 116-22+; there are continuing buys of put spreads: +10k Week2 July 114/113ps (settled 3), +10k TYQ 114/113ps (settled 6), +15k TYU 115/113p 1×2 for 1 (settled 2).
–Mester says that the Fed is just getting started on hikes, and would like to see 3 to 3.5% by the end of this year (which is priced) and 4% by the end of next year (which is not priced, as the market is leaning towards ease next year). FFF3 settled 9654 or 3.46%, right in line with Loretta. FFF4 settled 9676.5 or 3.235%. Back end of the dollar curve steepened slightly, with red/gold pack spread settling -9.75, up 2.375 on the day. Not much of a move, but if the Fed is ending hikes this year, then there’s a significant amount of flatteners that need to be reversed.
–The ECB Forum at Sintra is occurring with comments expected from Lagarde and Bailey. Powell is speaking this morning. Richmond Fed Mfg Index plunged to -19; Dallas Fed Services Index plunged to -12.4. There is some talk circulating that Friday’s Mfg ISM could see a sub-50 print; it was 56.1 last. Fed’s preferred inflation data, Core PCE prices are also released Friday.
