The big news: on Friday at 8:30 am EST, CPI came in hot: +1.0% m/m, or an incredible +12% if you annualize the number versus last month’s +0.3% m/m. This really moved the markets, some charged higher, others plunged. For the most part, it was a risk-off move.
The buck had a huge rally – up +1.96% on the week, with half of the move happening on Friday. My guess: the banksters saw this print coming. They probably had models that sniffed it out. And/or they got hints from within the system. This is why we like to watch prices. The well-connected banksters have the story days before we do, but the secret tends to leak out via price moves in the hard-to-control market segments.
Where did the money flowing into the buck go? Well, it didn’t go into the 10-year, where rates shot higher, especially on Friday. The 10-year rose +20 bp to end the week at 3.16%. The last time we saw 3.16% in the 10-year yield was 2018. And the associated 30-year mortgage rate is now at 5.23%. That’s the highest 30-year rate since 2009. That probably won’t help housing prices very much.
Money also fled crappy debt, which did terribly – JNK fell all week long. If there was any clue as to how this CPI read was going to play out for risk assets, crappy debt provided the “coal mine canary” answer. The weekly drop for JNK was -3.94%, a massive plunge. Someone got the news in advance here too, it seems.
Money also fled equities, with SPX falling -5.32%. The gap-down open on Friday, along with the close-at-the-lows was definitely not a positive sign for equities. (Black marubozu candles – Friday’s SPX print – don’t mark lows very often.) The sector map was bearish: financials (-7.19%), tech (-6.79%), and REITs (-6.49%) led lower. Model shows a downtrend in all timeframes.
Given the plunge in risk assets – which seem to be projecting a lot more rate increases ahead by the Fed – gold did extremely well.
by jim-h-2 
