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Late Friday afternoon, US main equity indexes showed little change, with the S&P 500 on track for a 2% weekly gain after investors digested new concerns about a slowing economy and elevated inflation, rekindling fears of stagflation.

During the session, Treasury yields increased due to persistent inflationary pressures, complicating Federal Reserve Chairman Jerome Powell's plan to cut interest rates later this year. Although most of the earnings season has concluded (prepare for Nvidia ER later this month), the continued strength from Corporate America remains a positive highlight. However, companies are increasingly signaling that low-income consumers are starting to crack. 

Let's begin with the biggest macro news in the session: This morning's consumer confidence survey from the University of Michigan pointed to an implosion of Bidenomics. The report was a total disaster. The index "unexpectedly" plunged from 77.2 to 67.4, a 9.8-point drop, the biggest since August 2021. 

... and was only a 7-sigma miss to expectations of a 76.2 print...

... but it was the biggest miss on record!

The consumer confidence report was released at 10:00 AM ET. Immediately afterward, US equity indexes gave up most of the gains and fell, moving sideways in afternoon trading. 

Among the US main equity indexes, the Russel 2000 was the biggest loser in the session. This is mainly because of economic weakness. 

There was little notable sector performance across the S&P500 besides tech, which was marginally higher, and energy, down half a percent. 

NYSE TICK showed selling pressure after 10:00 AM and persisted into early afternoon. 

Most shorted stocks are running out of steam to end the week. 

Treasury yields extended gains after the report as stubborn inflationary pressures reminded traders of the higher-for-longer theme. 2-year yields reached weekly highs while Fed-dated OIS adjusted to price out rate cut expectations for this year. 

The Treasury 10-year Yield climbed above 4.5%. 

Today's stagflationary warning is a new challenge to the outlook of the Fed's interest rate cutting cycle. Fed swaps for '24 immediately sank from 1.77 cuts to about 1.63 cuts by late afternoon. Nasdaq futures tracked lower on fewer rate cuts. 

"Our economists continue to forecast two rate cuts from the Fed this year beginning with the July meeting. And yields on 10-year Treasuries have come off recent highs following last week's soft Payrolls report," Goldman's Chris Hussey wrote in a note this afternoon. 

Citi's US Economic Suprise Index slides to the lowest since January 2023. 

Whoops. 

Entire dovish move from huge jobs report miss has been reversed on catastrophic UMich print (which signals even more economic weakness) pic.twitter.com/xbjLTsa24e

— zerohedge (@zerohedge) May 10, 2024

What to expect next week. 

Which will reverse again next week when CPI is a huge miss https://t.co/8rjS34FLYL

— zerohedge (@zerohedge) May 10, 2024

Bitcoin and Ethereum were clubbed like a baby seal after the report, sending the dollar soaring in a more hawkish environment. 

Meanwhile, JPM gets bullish on ETH. 

JPMorgan now just as bullish on ethereum as Larry Fink. Good luck @GaryGensler pic.twitter.com/tdQFKUvsKI

— zerohedge (@zerohedge) May 10, 2024

In commodities, WTI was whacked from the near $80bbl handle, tumbling down to a low $78 after the report. Gold and silver slid on a strong dollar. 

Looking ahead, next week will be packed with macro data points, including the release of CPI, PPI, retail sales, and industrial production in the US. 

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