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Profit from the Pros By Kevin Matras Executive Vice President
Stocks End Mixed, Treasury Yields Soar
Stocks ended mixed yesterday with the Dow and the S&P finishing modestly lower, while the Nasdaq and Russell 2000 finished modestly higher.
The 2-Year Treasury yield hit a 15-year high at 4.29%, while the 10-Year yield hit 3.95%, also a 15-year high.
With the Fed last week saying they expect the Fed Funds rate to hit 4.4% by year's end, the treasuries have wasted no time in pricing in those expectations.
With the Fed Funds midpoint currently at 3.13%, the Fed will need to raise rates by another 125 basis points over the next two Fed meetings in November and December. And with the terminal rate of 4.6% expected to be reached by early next year, that will require an additional 25 bps, maybe as early as the February meeting.
But the Fed did say they will continue to look at the data and take each meeting as it comes.
In the meantime, we'll get another look at inflation with the CPI (Consumer Price Index) and PPI (Producer Price Index) reports in October. While both remain near 40-year highs, they have ticked down from their summer peak.
In other news, the Case-Shiller Home Price Index dipped -0.8% m/m, but was still up a robust 16.1% y/y.
New Home Sales surged in August to 685,000 units (annualized) vs. July's upwardly revised 532K and views for 498K.
Durable Goods Orders slipped -0.2% m/m, but ex-Transportation it was up 0.2%. And Core Capital Goods were up 1.3%.
The Richmond Fed Manufacturing Index was flat vs. last month's print of -8 and estimates for -4.
And Consumer Confidence shot up to 108.0 vs. last month's 103.6 and the consensus for 104.3.
Today we'll get MBA Mortgage Applications, the Pending Home Sales Index, Retail and Wholesale Inventories, the International Trade in Goods report, the Survey of Business Uncertainty, and the State Street Investor Confidence Index.
The market appears oversold. And is ripe for a rebound.
The S&P attempted one on Monday and then again on Tuesday, but could not make it stick.
One of these days it will. Traders are on the lookout for it. And you should be too.
See you tomorrow,
Executive Vice President, Zacks Investment Research
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