Welcome back,

Powell’s congressional testimonies are over and the market turbulence has just begun.

Let’s keep it concise.

Market Headlines 👀

• Private credit groups including Apollo (APO), Ares (ARES) and Blackstone (BX) edge out banks to offer Carlyle (CG) the largest direct loan of its kind ($5.5B).

• Senators introduce bipartisan bill to give president power to ban TikTok and other tech.

• Citadel’s Ken Griffin anticipates a US recession after “traumatic” levels of inflation.

• Twitter (TWTR) may break even on a cash-flow basis in Q2, according to Elon Musk.

• The Bank of Canada holds its interest rate at 4.5%, pausing rate hikes.

• Australia’s central bank raised interest rates for the 10th consecutive time, but indicated that increases could be nearing an end as inflation is being tamed.

• Eurozone GDP growth was revised down from 0.1% to 0% in the fourth quarter.

• Silvergate (SI) in talks with FDIC officials on ways to salvage the bank.

• Reddit gets a TikTok-style feature that introduces a separate video feed.

• Ford (F) slashes Mustang Mach-E pricing, undercutting Tesla (TSLA) in China.

• Palantir (PLTR) lands $99.6M deal with U.S. State Department.

• US MBA mortgage applications increase for a fourth-straight week (+7.4%; prev. -5.7%).

• JOLTS job openings in January came in at 10.82M (exp. 10.55M; 11.23M prev.).

• US ADP nonfarm payrolls rose by 242,000 in January (est. 200,000; prev. 119,000).

• US trade balance came in at -$68.3B (exp. -$68.7B; prev. -$67.4B).

• EIA crude oil inventories reported at -1.694M (exp. 1.6M; prev. 1.165M).

• Apple (AAPL) to shake up its international sales operations to make India its own region.

• U.S. House focuses on debt as President Biden proposes $3T in deficit cuts.

Earnings 💸

• MongoDB (MDB)

  • EPS: $0.57 beats (exp. $0.07)

  • Revenue: $361.3 beats (exp. $337.7M)

• Asana (ASAN)

  • EPS: -$0.15 beats (exp. -$0.27)

  • Revenue: $150.23M beats (exp. $145.07M)

Recap Around the Street 🧠

Strong economic data continues to postpone the next economic downturn. In testimony that continued today, Fed Chair Jerome Powell noted that several upcoming data releases will be key in his fight on inflation. Despite mounting pressure, the continued stream of strong hiring and consumer spending data are complicating Powell’s attempts.

It was only February 1 when Powell declared he could now say the “disinflationary process” had begun. Less than five weeks after the Fed slowed its pace of interest rate hikes, Powell warned yesterday that it may need to re-accelerate. Powell, in trying to turn a new leaf on inflation, has blown the disinflationary narrative away. The pandemic and the unprecedented policy measures that followed are still interfering with the Fed’s campaign to tame inflation.

Attention now awaits the Fed’s March meeting, which will decide just how much tightening will accelerate. Powell confirmed today he wouldn’t entertain a 50 bps rate-rise in March “without intending to follow through with that outcome.” In his words: “Only surprisingly weak data will prevent that outcome now.”

JOLTS job openings have changed little over the last six months. January JOLTS job openings came in at 10.82M (exp. 10.55M; 11.23M prev.). The ratio of job vacancies to unemployed workers remains hovering around 1.9.

JOLTS has beaten expectations 27 of the past 29 months, and 5 consecutive months in a row. JOLTS quits rate moved down in January to 2.5%, which is still elevated relative to history, but the lowest since March 2021.

In related news, the ADP employment report smashed past expectations, with an increase of 242,000 private payrolls (forecast was 205,000). Despite the positive headline, layoffs and discharges in January marked the third largest rise in 20 years, ex-pandemic.

The deepest bond yield inversion since ‘80s Fed Chair Volcker is screaming for a hard landing. The bond market had its own thoughts about Fed Chair Powell’s warnings of a return to bigger interest-rate hikes. And it wanted those thoughts heard, loud and clear.

Swaps traders have priced in around a full percentage point of Fed hikes over the next four meetings. At the same time, the yield on two-year Treasury notes touched 5.08% on Wednesday – its highest level since 2007. Critically, longer-dated yields remain in check, with the 10-year rate under 4% and the yield on 30-year bonds even lower.

The US 2-year yield now exceeds the 10-year yield by a full percentage point. The 2-year skyrocketing and the 10-year falling means the Treasury yield gap is huge. In other words, the bond market is upside down. The bond market is now doubling down on the prospect of a US recession.

Market Preview 🎞️

• Thursday: US Challenger job cuts, initial jobless claims, household change in net worth, China CPI & PPI

• Thursday: JD.Com (JD), BJ’s (BJ), Ulta Beauty (ULTA), DocuSign (DOCU) & Oracle (ORCL) earnings

• Friday: US nonfarm payrolls, unemployment rate, monthly budget statement, Bank of Japan policy rate decision, Apple (AAPL) annual shareholder meeting

Set a reminder to tune into our next Twitter Spaces March 13th at 3PM EST. We’ll be previewing the CPI release and its macroeconomic implications, featuring a slate of speakers you won’t want to miss.

That’s all for today, folks! We’ll be back around the same time tomorrow with a curated list of important news, economic data and market highlights. 

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