Thursday, Mar 9, 2023

A market breather, crypto weakness, Silvergate woes

“The enemy of the conventional wisdom is not ideas but the march of events.” – J. K. Galbraith ||

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MARKETS

An uncertain bounce

The second day of Fed Chair Powell’s testimony before Congress assuaged some nerves, with the US 10-year yield unwinding the previous day’s gains, only to change its mind and climb back up again, stopping just shy of 4.0% (at time of writing). It’s high, but still lower than at the beginning of the month. The S&P 500 also found the energy to rally at the end of yesterday’s weak trading session, to close more or less where it started.

(chart via TradingView)

This “pause” largely seemed to come from Powell’s assurance that the decision regarding a larger hike later this month had not yet been taken, giving traders hope that tomorrow’s employment report will deliver a pleasant surprise (which would be more people losing their jobs, not at all pleasant for them, so unfortunately it looks like we’re back to bad-news-is-good-news).

Yesterday we got the February ADP non-farm payrolls, which usually come out a couple of days before the Bureau of Labor Statistics (BLS) release and are often taken as a harbinger of the more official numbers. This is not always the case, however – in February, the APD data surprised to the downside, with a January payroll increase of 106k (later revised up to +119k) vs 178k expected and 253k in December. Then, two days later, we got the BLS data shock, with much higher-than-expected employment growth. So, ADP doesn’t necessarily lead.