Keeping An Eye On Japan

But Nvidia Tho

What started as another week that tilted towards defensive equities quickly changed its tune once NVIDIA dropped another market-friendly quarterly earnings report. Utilities, in particular, had been putting together a strong stretch relative to the S&P 500 and was looking like it was on the brink of signaling a change in short-term market sentiment. NVIDIA’s results, however, brought extreme bullishness back to U.S. equities and probably delay the return of risk-off conditions for the time being.

We’re seeing a fair amount of volatility in the bond market, but the overall trend for Treasury yields remains higher. The first part of the bond correction felt inevitable. As soon as Powell said the Fed was forecasting three rate cuts in 2024 and the markets immediately priced in 6-7, Treasuries were set up for a decline. Today, the risks are finally becoming more balanced. The futures market is pricing in just 3-4 cuts this year with a June start date, much closer to Powell’s original target. The question now is whether the Fed has moved the goalposts on its forecast as well. If you listened to any of the speeches from Fed members this week, you’ll quickly realize that they’re in absolutely no rush to cut the Fed Funds rate. The bond market is probably still positioned a little too dovish, but the gap between the Fed and the market seems to have shrunk considerably.