The stock market is feeling some relief from high rates today.
US 30-year yields hit a 15-year high today at 5.00% but have since backed all the way off to 4.86%. That's been coupled with falls across the curve with US 2-year rates down 10 bps to 5.04%.
There's an ebb and flow her and the selling in bonds has been extreme, so there's some natural reversion but oil is certainly part of the equation. Crude is down $5 today and down $10 in the past week. Combined with the crumbling in gasoline cracks, that removes a significant inflationary impulse from markets and may allow the Fed to leave rates at these levels and cut late next year.
Along those lines, Fed fund futures see only a 22% chance of a hike on November 1, down from 30% just yesterday. Any hike at all is down to 39% from 50% a day ago.
Looking further out, the market is pricing in 71 bps in easing by next December, up from 59 bps a day ago.
Given that these markets are repricing daily, I hardly need to reiterate that it's all fragile at the moment. Tomorrow we get weekly US jobless claims and trade balance data. That will be followed by Friday's non-farm payrolls report.
The Nasdaq was last up 1.4%, a session high.
