David Rosenberg: Why that 'remarkable' stock market rally was just another head fake

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David Rosenberg: Why that 'remarkable' stock market rally was just another head fake EconguyRosie

Who knew a 15-basis -point trimming here could elicit a 1,200-point surge in the Dow Jones industrial average and a 5.5 per cent jump in the S&P 500? This smacks of more short covering.By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails. Postmedia Network Inc.

High-yield bond spreads only tightened 10 basis points , which recouped but half the prior day’s widening. And as great as the CPI data were, 10-year TIPS breakevens fell a modest four basis points to 2.4 per cent. A step in the right direction, for sure, and a shot in the arm from my view, but the moves we saw in stocks, nominal bond yields and the DXY dollar index, as much as the latter is a very overcrowded trade, were excessive, to say the least.

The Fed is already coming out with a chill narrative in the aftermath of Thursday’s tame inflation data. “This is just one piece of information. It’s far from a victory, 7.7 per cent is very limited relief. We can’t be complacent,” San Francisco Fed’s chief executive Mary Daly said. And Philly Fed chief executive Patrick Harker said, “I expect we will slow the pace of our rate hikes as we approach a sufficiently restrictive stance.”Now that’s a major “yikes.

 

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