Rates And The Dollar Continue To Melt Up As Stocks Stall Out
CPI came in as expected today, but that didn’t stop long-end rates from rising, with the 30-year up six bps and the 10-year up two bps. The dollar index also continued to melt up after the data, showing that core CPI remains sticky after a 0.3% m/m increase.
The bigger question for core CPI is whether some trend change is taking place. It’s unclear at this point, but the annualized 3-month rate of change for core CPI rose by 3.6%.
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Whatever the case, the 30-year closed at its highest level since early July. This looks like an important potential breakout that, depending on tomorrow’s PPI report, could push the 30-year even higher.
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Meanwhile, the dollar index made its highest close since November 2023 and is approaching the 107.25 level, which is of incredible importance. A breakout means the highs of 2022 could be in play.
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This is wreaking havoc across hard assets as real yields rise and commodities like gold and oil drop.Gold broke another support level today and an uptrend and could open a path to $2,500.
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Copper is at support, too, and a break of $4.05 opens a path to around $3.90.
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The Housing Index (HGX) saw a gain of nearly 1.4% evaporate over the day as rates rose. Rising rates will not be friendly to mortgages or the housing sectors.
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In the meantime, stocks have yet to get the memo that rates are rising and may head significantly higher from here. The S&P 500 was basically flat on the day and has stalled at resistance for now.
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The only question that remains is when credit spreads snap and start to widen. When they do, that will be the point at which stocks begin to finally cave.
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary for informational and educational purposes only. Michael Kramer is a member and investment ...
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