Stagflation Signs Soar As Bitcoin And Gold Jump, Bonds And Big Tech Plummet

Despite the chaos in oil prices today, wild swings in the stock market, gold and cryptos spiking, and bonds battered as stagflationary fears roared back, March Madness has started with a bang today.

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It was Germany's rather hot-than-expected inflation printout (following yesterday's hot prints in France and Spain) that sparked a pre-open ramp-up in yields and a dump in stocks before the market opened. During today's trading session, Hawkish Kashkari's comments did not help out of the gate and Manufacturing surveys confirmed fears of stagflation with a resurgence of inflation and a gradual slowdown of production and orders, pulling stocks to fresh lows.

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Due to the 0DTE-Call-Buying (highlighted in the orange box in the chart below), both the S&P 500 and Nasdaq have broken down to their 200 DMA and bounced back. There was a strong swing in gamma positioning this afternoon with 0DTE call-buying and put-selling occurring as the market sold off (even when the gamma position was favorable - green box).

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However, this wasn't enough for stocks to fade back towards the lows and the key technical levels, as they slipped back the lows. It was the Nasdaq that was the biggest loser on the day along with the S&P, but the Dow and Small Caps were able to get back into the green on the day.

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Dumping of Treasuries across the curve was seen with the belly of the curve underperforming (30Y +3.5bps, 5Y +9bps, and 2Y +7bps). The short-end (2Y) is the biggest loser of the week, followed by the long-end (3Y).

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For the first time since the CPI print in November, the 10-year yield exceeded 4.00%.

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For the first time in this cycle, the market has priced in a 5.5% terminal Fed rate for the first time (Sept 2023), putting an end to any hopes of a rate cut.

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Despite China's strong PMIs overnight, the dollar dropped a little in the US session as a result of the drop in the dollar overnight.

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The price of Bitcoin soared up to the $24k level, then faded back, then as equity trading commenced during the last hour of trading, BTC dropped.

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On top of that, crude oil prices went haywire today as a result of China PMIs, German inflation, as well as more crude inventory builds and US PMIs.

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Intraday, gold topped $1850, continuing yesterday's bounce.

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Lastly, the financial conditions continue to tighten in accordance with the reality of monetary policy.

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It is reasonable to assume that with a 2-3 week lag, the US Macro data is going to start surprising to the downside soon which in turn will lead to pivot talks, which will drive stocks and bonds higher, which will in turn loosen financial conditions... rinse, repeat.