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Bond Yields Hit 2-Year High, Stocks Hit Hard, Gold Firm

Bonds 6-month and longer duration were smacked today as is the stock market.
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Treasury Yields 2021 to Date 2022-01-18

Bonds Hit Hard

US Treasuries were hit hard today with the 3- 5- and 7-year yields all rising 10 basis points as of about Noon central. The market now expects 4 hikes this year. I don't.

Yield Change Since December 3, 2021

Yield Change Since December 3 - 2022-01-18

Bonds have been smacked hard since December 3 reflecting increasing belief the Fed will hike sooner and more frequently to contain inflation.

85% Chance of a Hike in March

Target Rate for March 2021 as of 2022-01-18

The market is convinced that the Fed will end tapering and hike at the same time, at the March 16 FOMC meeting. Chart from CME Fedwatch

Projected Rate Hike Odds For December 2022

Target Rate for December 2022 as of 2022-01-18

The market now expects 4 hikes this year with a 26.7% chance of 5 hikes and an 11.8% chance of 6 hikes. 

Market Selloff 

As of 12:45 PM central the markets are down 1.5% to 2.2%.

  • Dow -541 Points, -1.50%
  • S&P 500 -77 Points, -1.66%
  • Nasdaq -324 Points, -2.12% 

The market is not too pleased with tightening liquidity although some analysts blame today on a Goldman Sachs Profit Miss. 

Wall Street's main indexes fell on Tuesday as Goldman Sachs (NYSE:GS) led declines among banks after posting its quarterly profit below expectations, while big technology stocks were slammed by rising Treasury yields.

Goldman plunged 7.7% after missing fourth-quarter earnings estimates on weak trading activity, dragging the S&P 500 banks index down by 2.4%.

"Market as a whole is trying to assess the ability of companies to maintain the bottom line in the face of rising costs," said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

"And banking may just be the first sector to report in 2022 that, at least for now, the costs are running faster than the revenues."

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Gold Quiet

Gold Daily 2022-01-18

Gold is relatively quiet today, down about $5, 0.27%.

Gold Monthly Chart 

Gold Monthly Chart 2022-01-18

Technically speaking that is one of the prettiest cup-and-handle formations you will ever see. 

I believe it will resolve in the implied direction which is up. 

Fed is Out of Control

Every Measure of Real Interest Rates Shows the Fed is Out of Control.

Yet, I highly doubt it we see as many rate hikes as are currently priced in. 

Rather, the Fed will hike until they break something and recession will hit first. For discussion please see When Does the Sizzling Economy Hit a Recession Brick Wall?

Also see The Fed Expects 6 Rate Hikes By End of 2023 - I Don't and You Shouldn't Either

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