Powell-Yellenburg Omen? Dow Drops 1,000+ Points, NASAQ Down 5%, Commodities Rally After Lunch As Fed Fear Strikes

It has been a miserable day for markets as The Federal Reserve struggles to get inflation under control.

The Dow fell over 1,000 points today and NASDAQ was down a cool 5%.

Is the Hinderburg Omen back in fashion? Better yet, the Powell-Yellenburg Omen?

While equity markets have gotten clobbered by Powell and the Gang, commodities at least rallied in the afternoon.

Medusa Touch! US Labor Productivity For Q1 CRASHES To LOWEST Since 1947 As Energy Prices And Inflation Skyrocket

Here’s some simple Medusa math for you: negative growth + payroll gains = negative productivity. Negative productivity + high labor costs = very high unit labor costs. That’s not a pretty picture for the economy or for companies, and the Q1 figures were even worse than expected — productivity fell by 7.5%, pushing unit labor costs up by 11.6%. Nasty.

In fact, labor productivity fell to the lowest level since 1947 and President Harry Truman.

Of course, Biden’s green energy policies have led to crushing inflation.

So, after Fed Chair Powell (aka, Jay The Revelator) said yesterday that “No Signs US Economy ‘Vulnerable’ To Recession”, we saw the S&P 500 index dive 1.5% and the 10-year Treasury yield break through the 3% barrier.

Biden’s policies are a Medusa-touch on the economy.

The new logo for the Biden Administration.

Fear The Talking Fed! Fed Jacks Target Rate Up By 50 BPS, 9 More Rate Hikes A Comin’ (Yield Curve Rises)

Well, the Fed’s talking heads have been saying a 50 basis point hike was coming in May … and it appeared!

And it looks like 9 rate hikes are a comin’ by February 2023.

The Fed’s Dot Plots shows a cooling of Fed rate hikes by 2024 and beyond.

Here is the path of Balance Sheet peel-off.

The US Treasury actives curve is up by 14 bps at the 10-year tenor and up 17 bps at the 2-year tenor.

The plan will see $30 billion of Treasuries and $17.5 billion on mortgage-backed securities roll off. After three months, the cap for Treasuries will increase to $60 billion and $35 billion for mortgages.

I could read the Fed’s speech on their decision, but since The Fed has been so highly politicized, I don’t really care what they say. Only what they do.

Bond Rout! Treasury Curve Settles In At 20BPS (10Y-2Y), SOFR Coupons Slow To Adjust To Fed Rate Hikes, While Mortgages FAST To React (CoreLogic March Home Prices UP 20.0% YoY In March)

The U.S. Treasury market is showing signs of stress that may have implications for whether the curve keeps steepening.

Over the past month the curve has retraced from an inversion to a steepening driven by a surge in yields on benchmark 10-year bonds. That has led to interesting outlier indications, as traders weigh the outlook for Federal Reserve interest rate increases and inflation.

The US Treasury yield curve has settled-in at 20.383 bps (effectively zero) as The Fed continues its war on inflation.

On the SOFR front, we see SOFR Coupons being slow to benefits from Fed rate hikes. So, SOFR Coupons are behaving like Stouffer’s lasagna, frozen and tasteless.

On the other hand, mortgage rates continue to soar on EXPECTATIONS of Fed rate hikes.

Meanwhile, CoreLogic revealed that March 2022 home prices were still sizzling at 20.9% YoY.

Phoenix AZ leads the top ten at 30.4% with Washington DC lagging at 9.9%.

So, its official. The Federal Reserve is best exemplified by former Yankee/Mets first baseman “Marvelous” Marv Throneberry. When players presented Mets’ manager Casey Stengel with a birthday cake but neglected to give piece of cake to Throneberry, Stengel replied to Throneberry when asked why no cake, “Because I was afraid your were going to drop it.”

Just like The Federal Reserve, the honorary Marv Throneberry of the the global economy.

Here is Marv’s baseball card from better days with the Yankees before they figured out that Marv was a terrible fielder. And strikeout quite a bit, like The Federal Reserve.

Medusa Touch II: REAL Wage Earning Growth Remains Negative, Reverse Repos Continue To Grow, Lithium Prices And Mortgage Rates SOAR

President Biden (or whoever is pulling his strings) is inflicting a “Medusa Touch” on the US. That is, everything his administration touches turns to stone.

Yesterday, I walked through the rise in energy and food prices under Biden, and it is horrific. The only “disinformation” was generated by the Biden Administration itself claiming that soaring inflation is due to Russia’s invasion of Ukraine. I demonstrated that inflation began with Biden’s anti-fossil fuel executive orders and the Russia invasion only made things worse.

Let’s look at average hourly earnings. Thanks to “progressive” energy policies from Biden, REAL average hourly earnings growth has crashed and burned.

But here is the chart that the Biden Administration touts showing average hourly earnings growth at 5.6% YoY (although I doubt if Jen Psaki would leave out the massive distortion caused by The Federal Reserve’s “Let’s go crazy!” monetary policy.

Another Medusa Touch moment is the reverse repo market. When I wrote about reverse repos before, several people wrote me saying “You don’t understand. This is a temporary problem and will vanish shortly.” However, The Fed’s reverse repo facility has now climbed to an all-time high.

Then we have the disruptive effects of The Federal Reserve deciding for us that mortgage rates are too low and should be higher.

Now look at lithium prices, a key element for electric car batteries. Making the switch from Internal combustion engines to electric motors far more costly.

The list goes on and on.

Suffice it to say, everything the Biden Administration touches turns to stone.

But I wager that the Biden Administration wishes that Hunter Biden’s laptop would turn to stone.

Only an elitist DC bureaucrat like Joe Biden would laugh at inflation that is ruining the lives of millions of Americans.

Consumer Sentiment For Home Buying Crashes To Lowest Level Since 1982 As Bear Sentiment Takes Hold In Stock Market

Rising home prices and The Fed signaling an end to the perpetual punch bowl have resulted in the University of Michigan buying conditions for houses to hit the lowest level since 1982.

While bearish sentiment in markets highest since 2009 in the stock market.

I don’t get why Biden created a “Disinformation Control Board” led by Nina Jankowicz – a disinformation spewer. We already have disinformation media outlets like CNN, MSNBC, ABC, CBS, NBC, New York Times, Washington Post, etc., so why create a Federal control board? All in time for the midyear elections!!

If this move by Biden doesn’t terrify you, then you didn’t study history.

Q1 US Employment Costs Skyrocket Most In History Helping To Increase Already Soaring Inflation (PCE YoY Rises To 40-year High of 6.60% YoY)

Not only has The Federal Reserve driven M2 Money Velocity to near historic lows, but now we find out that the Employment Cost Index just rose to a historic high.

Of course, a variety of minimum wage laws have helped drive up employments costs. Don’t tell lawmakers that minimum wage laws lead to higher inflation since they typically deny responsibility for anything. But I can almost picture the 4 Horsemen of the Inflation Apocalypse (Powell, Biden, Pelosi, Schumer) sitting around asking “What we can do to make inflation worse?”

We did see the PCE Deflator YoY rise to 6.6%, the highest since 1982, the highest in 40 years.

Personal spending increased to 1.1% in March, probably panicking buying over further inflation.

A PCE Deflator of 6.60% leads to a Taylor Rule estimate of 9.05% for The Fed Funds Target Rate.

The Federal government and Federal Reserve trying to solve inflation reminds me of Parks and Recreation’s Jerry Gergich trying to celebrate his retirement.

Bidenflation Roars To 25% YoY In March As Real GDP Growth Goes Negative (Clueless Joe)

While headline inflation is growing at 8.6% YoY in March, flexible price inflation grew at a terrifying 25% YoY rate.

Even with headline inflation of “only” 8.56% YoY, today’s Q1 real GDP growth checked in at -1.4% QoQ. Clearly, Bidenflation isn’t help the economy or anyone else.

Diesel prices have skyrocketed under Biden.

Instead of Shoeless Joe, we have Clueless Joe as President.

Alarm! US Treasury 10-year Yields Rise Over 11 BPS As Treasuries And Agency MBS Continue Downward Price Path (Pension Funds, SSA BEWARE!!)

Alarm!

Particularly if you are a pension fund and hold US Treasuries and Agency Mortgage Backed Securities.

The bad news is that the 10-year US Treasury Note declined in price, sending the yield up over 10 bps today.

As The Fed is projected to raise its target rate over 10 times by February 2023, 10-year Treasury Note prices and agency MBS 3.5% prices continue to decline.

Here is a video of The Biden Administration and The Federal Reserve attacking pension funds and Social Security.

Heartaches In Heartaches! US Q2 Real-time GDP Stumbles To 0.446% As Fed Continues Monetary Stimulypto (What Will Happen When The Fed Pulls The Plug??) March Pending Home Sales Decline -8.90% YoY

Heartaches in heartaches. US GDP growth for Q2 has stumbled to 0.446% as The Fed is launching quantitative tightening (QT) to fight the inflation that they caused in the first place.

According to the Atlanta Fed’s GDPNow real-time GDP tracker, US GDP growth has stumbled to a meager 0.446%. Despite the massive stimulus from The Federal Reserve and Washington DC’s massive fiscal stimulus.