Stocks are oversold, but need rates to stabilize before luring back buyers

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You'd think with all the negative headlines there would be some flight to Treasurys, but no. The opposite. The macro worry is that rates are headed higher.

If this is a bottom, it's without the usual signals. Stocks are up modestly in early trading Wednesday, but the usual signals of volume spikes and higher volatility are still not present. Most importantly, none of the concerns about rising rates have been assuaged. How sudden was this move toward 5% in the 10-year Treasury yield? Chris Verrone at Strategas noted that the number of sellside analysts who predicted that the 10-year would end at 5.0% or higher at the end of 2023 is: zero.

Minneapolis Fed President Neel Kashkari said there was a 60% probability that a soft landing would indeed occur: "After potentially one more 25-basis-point federal funds rate increase later this year, the FOMC holds policy at this level long enough to bring inflation back to target in a reasonable period of time." He gave a 40% chance that inflation would require more rate hikes to bring it under control. Here's what's missing for a bottom: a volume push, and more panic.

 

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