For weeks leading to the jobs report, the revised strong GDP, and now the March inflation report, markets defied bears. That changed on Wednesday, April 10, 2024.
The U.S. BLs posted Consumer Price Index rising by 0.4% from last month. CPI is up by a decisive 3.5% Y/Y. Few economists or experts predicted such an increase, compared to February’s 3.2% annual price rise.
Markets will shift their attention away from Fed Chair Powell’s plans to cut interest rates sometime this year. They will watch the bond market very closely. Monitor the 10-year Treasury yield. Yields jumped to 4.536%, up from below 4% in late Dec. 2023. Markets wrongly expected the Central Bank would cut interest rates by six times.
Media will backtrack on the optimistic assumption that the Fed would cut rates three times in 2024. Every monthly CPI report will matter more than guessing what the Fed will do. Sectors sensitive to valuation will likely underperform from here. In the chip sector, look for Qualcomm (QCOM), Intel (INTC), and Microchip Technology (MCHP) pulling back.
Asset management firms Blackstone (BX), T. Rowe Price (TROW), and Blackrock (BLK) fell between 2.5% and 4.49% yesterday. However, regional banks have the highest risk. The longer rates remain higher, the more stress it adds to the balance sheet of Truist Financial(TFC), U.S. Bancorp (USB), KeyCorp (KEY), and PNC Financial (PNC).
