Here's a hint of what's to come.
The Fed funds futures market was pricing in as much as 100 bps of cuts in 2024 last week after the Fed and non-farm payrolls. Now, that's been pared back to 76 bps.
Essentially, that's a full round trip from pre-Fed levels.
It comes as Powell and pretty much everyone else on the FOMC has pushed back against dovish Fed pricing. They've been trying to keep alive the optionality of hiking again at one of the next two meetings. That hasn't taken hold with just at 23% probability at the Jan 31 meeting but they might not be done yet.
In any case, EUR/USD is now back at the lowest post-payrolls levels and US 2-year yields are above non-farm payrolls levels.
It's starting to look like a few markets got ahead of themselves.
I continue to believe that 10s are where the tell is and we haven't been able to get below 4.50%. I think we will carve out a 4.50-4.75% range for a period but earlier this week, there were some strong buyers waiting in the weeds in the high 4.60s. Let's see if we get a repeat of that and then go from there. In the meantime, it looks like the winning streak in the Nasdaq is over.
