ADP Data Flag Wage Contraction... Not Just Wage Slowing, But Wage Contraction!

What was with the stock market’s FOMC reaction yesterday?

Highlights

• What was with the stock market’s FOMC reaction yesterday?

• Sentiment (not fundamentals) continues to drive equities

• Regional banking crisis rears its ugly head

• More recessionary data from the Chicago PMI and Philly Fed

While We Were Sleeping

What a day! The yield on the 10-year T-note closed near the lows of the session (-11 basis points to 3.93%) as did the 2-year (-12 basis points to 4.22%). When all was said and done, the swaps market ended up pricing in just 35% odds of a March cut, down from over 70% before the FOMC press statement and Powell presser. But we still have close to six rate cuts being discounted for 2024, so this was less about cuts coming out of the market — just getting shifted back (first cut fully priced for May). Our detailed assessment of the Fed meeting and what it entails for the interest rate outlook is contained in today’s Breakfast with Dave edition.

But what was with the stock market?? The Dow was crunched -317 points (-0.8%), the S&P 500 fell -1.6% and the Nasdaq slid -2.2% (and high yield spreads blew out +15 basis points to +342 basis points). This is what I have been saying about the current state of the equity market — it is a market for trading junkies, not investors.