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Stocks finished the day lower, one day ahead of tomorrow’s core PCE report. Analysts expect core PCE to rise by 0.3% m/m, and Kalshi is pricing a core PCE of 0.4% m/m. It will be interesting to see if Kalshi can be a reliable source for some of these reports. A 0.4% m/m number would not be a good number.
Speaking of inflation today, we got the KC Fed prices paid data, and that was up sharply, too, in March, following the Empire State and Philly Fed.
1 and 2-year inflation swaps today jumped, breaking out, with both climbing to new cycle highs.
Speaking of breakouts, today, the CDX High Yield Spread Index broke out of that bull flag we mentioned last night. If spreads are breaking out here, it won’t be long before we see the S&P 500 break down.
In the end, these spreads just inverse to the S&P 500, and one can see that if the spread is breaking out, that the movement in the SPX are probably not far behind.
If the S&P 500 going to break lower, tomorrow seems like the best chance, given that today, was a pause day, with that doji candle. The index all closed below its 10-day exponential moving average, suggesting the recent move in the index higher, was a false move. If this bear flag is the real thing, which it looks very real to me, then next leg lower could take us to around 5,000.
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