Morning Note | March 25, 2022

Good Morning!

Futures are up as the markets look to close out their second straight positive week.  the 10-year is hitting new highs at 2.42% and oil is down 2.2%.  Earnings season is starting soon and could affect the market direction.  US, EU strike LNG deal as Europe seeks to cut Russian gas. 

In what seems like a continuous trend, markets finished the day with another 1%+ move.  The S&P finished strongly higher rising 1.1%.  The jump comes with oil prices moving lower again, with a barrel of crude dropping around -3%- although still trading around $110.   Meanwhile, bond yields resumed their climb higher, as the U.S. 10-year yield is up to 2.35%, close to the year's high of 2.38%. Investors seem to be pricing in a more hawkish Federal Reserve, as probabilities for a 0.50% rate hike have moved higher for the Fed's May meeting. 

The split in this market continues with safe haven assets rising along with other "risky assets."  Gold and the US dollar were both up again yesterday.  We also had solid economic data with the manufacturing PMI hitting 58.5, a six-month high, with services at 58.9, a nine-month high.  

The economic data suggests that the demand picture in the US economy remains exceptionally strong and that a recession, at this juncture, is unlikely. This could also be showing early signs of easing in some supply chain pressures which could ease prices from marching higher and, ultimately, mean the Fed wouldn't have to raise rates as much to get it inflation under control.

A quick PIMCO update in today's note...