Morning Rundown | Credit Says "Crash is Almost Over"

Bank Assesses Monkey Pox

May 25, 2022

∙ Paid

Market Rundown:

Good morning. Everything seems to be doing a little recession shuffle this morning except energy. The Dollar is up 50. Bond are stable. Stocks are softer by 50bps since about 5am. Gold is trading $1853 off its lows of the early morning. Silver is down 29 cents. Oil is up $1.30. Grains, Crypto, and Copper are all weak. Gold people might want to listen to the podcast this morning as it describes the changing environment for US gold demand.

Traders should remember FOMC miute days can make the market behave as 2 distinct days; before 2pm and afterwards.

Excerpt from ZH Premium: (emphasis ours)

The third and final view is far more cheerful for market bulls, and comes from CreditSights: the boutique credit research firm argues that the US corporate bond market is finally flashing a welcome - if very red - signal: that the stock market crash is almost over.
According to Credit Sights, corporate bond spreads - a measure of the interest-rate premium corporate bonds offer versus Treasuries - has almost doubled in the past year, a sign of increased worry about American companies. That, of course, as equities have crumbled with the S&P 500 down almost 20% since its January peak.- Source

Implications being, that even if the Fed can afford to ignore a weak stock market as a bailout alert; it cannot ignore credit markets. So if CreditSights is correct, the worst is nearly over for now.

WEDNESDAY, MAY 25

    8:30 am Durable goods orders April 0.6% 0.8%

    8:30 am Core capital equipment orders April -- 0.9%

    2 pm FOMC minutes

Investigation including genomic sequencing are underway to understand the transmission routes and whether recent cases are caused by new mutations that giver rise to a higher transmission rate than prior outbreaks. However,given that monkeypox has a low mutation rate (double-stranded DNA virus vs. single stranded RNA virus such as COVID), low transmission rate (requires close contact vs.aerosal transmission in COVID), and vaccines are already available, a monkeypox outbreak should be containable.

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JPMorgan Weekly Outlook:

With FOMC tightening financial conditions, we lowered our outlook for GDP
Housing data already have weakened noticeably, recent signs on manufacturing and claims also softer
Consumer spending has held up so far into April
Year-ago PCE inflation rates should soften in April, while staying firm

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