Home » Stocks Rally on March 18 Ahead of Key Events Later This Week

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Stocks Rally on March 18 Ahead of Key Events Later This Week

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3/18/24

#Stocks –

#Macro – $SPX, $NDX, #FED, #BOJ, #RATES

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Stocks rallied on Monday, ahead of an eventful two days. The BOJ policy announcement is expected on March 19, which falls in the late evening of March 18 in the US. Rumors are circulating that the BOJ will look to end yield curve control and ETF purchases. The market is placing the odds of a rate at just 46%.

Meanwhile, the market is also busy repricing its rate path for the Fed policy, with Fed Futures now seeing fewer than three rate cuts in 2024.

This appears to be due to a change in the market outlook for inflation, with 1-year inflation breakevens now at their highest since July 2022 and 1-year inflation swaps continuing to move higher today by 1.1 bps to 2.635%.

It looks mainly like this results from gasoline pushing higher again to $2.74.

As well as oil moving up and clearing that consolidation zone at around $82.

Surprisingly, the US 10-year yield has behaved nicely, still below the 4.35% level. If the yield curve control in Japan ends, and BOJ allows rates to JGBs to move higher, then it could push rates higher here in the US as the world loses that global rates anchor.

Remember that what matters most about the Fed and rates is that the market is repricing the path of monetary policy, and monetary policy works through financial conditions. As the market reprices and adjusts, those conditions will tigthen, and the tightening of conditions will impact the stock market.

-Mike

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