‘The most bullish indicator we’ve come across in weeks’: Morning Brief

What’s hot? Anything but stocks for much of 2022.

Many online savings accounts are paying north of 2.50%. A 6-month Treasury bond is yielding 4.62% on Treasury Direct. I-Bonds, the viral bond whose rate is pegged to inflation, is currently paying 6.89%.

All this might be making a difference as the market digests interest rate moves amid the Fed’s ongoing fight against inflation.

In a note on Tuesday, Bank of America’s Equity and Quant Strategy team said that clients unloaded a net $6 billion in U.S. equities, selling for the second straight week in the biggest outflows since April ‘21 — and across 11 sectors no less, the first time in five years that’s happened.

And with a lot in the air and midterm election results to remove uncertainty — which is bullish, as Sam Ro wrote yesterday — a lot of indicators are leaving tea leaves for analysts to examine.

One stands out from our friends at DataTrek: The two-year U.S. treasury is yielding 0.33 percentage points more than the five-year, “an unusually large difference,” DataTrek’s Nicholas Colas wrote.

This is rare and has happened only a few times in recent decades: 1989, 2000, and 2006. It’s happening now and Colas says that it means that the market is saying the “Fed is going to start reducing rates in the next 1-2 years” or that there are structural inflation problems.

In any case, Colas’s takeaway is that “this is the most bullish indicator we’ve come across in weeks, even if its history says it is not especially good at calling stock market bottoms.”

This is why everyone is going to be glued to the screens as the CPI report crosses Thursday, giving us the latest look at whether the Fed is finally starting to get the compelling data it seeks.

What to Watch Today

Economy

• 7:00 a.m. ET: MBA Mortgage Applications, week ended Nov. 4 (-0.8% during prior week)
• 10:00 a.m. ET: Wholesale Trade Sales, month-over-month, September (0.4% expected, 0.1% during prior month)
• 10:00 a.m. ET: Wholesale Inventories, month-over-month, September Final (0.8% expected, 0.8% during prior month)

Earnings

• AppLovin (APP), Beyond Meat (BYND), Bumble (BMBL), Canopy Growth (CGC), Hilton Grand Vacations (HGV), iRobot (IRBT), Rivian Automotive (RIVN), Roblox (RBLX), SeaWorld Entertainment (SEAS), Starwood Property Trust (STWD), Signify Health (SGFY), Unity Software (U), Wendy’s (WEN), ZipRecruiter (ZIP)

Source: Yahoo Finance