S&P 500 Analysis and News:
- S&P 500 Digests Hawkish Brainard
- Brainard Breakout for the US 10Y
S&P 500 Digests Hawkish Brainard
US equities remain under pressure as market participants continue to digest yesterday’s hawkish speech by Fed’s Brainard. In terms of notable commentary, the rate setter stated that it is of “paramount importance” to get inflation down. Highlighting that policy will be tightened through a series of rate rises and by starting quantitative tightening at a rapid pace as soon as May. In turn, with yields breaking higher, with the benchmark 10yr now yielding 2.65%. Tech stocks in particular have underperformed.
Brainard Breakout for the US 10Y
Source: Refinitiv
That said, as I have mentioned previously, with markets seeing an unwind of the Russia war trade. The focus is back on the uber-hawkish Fed trade, meaning the bias for US equities remains fading the rallies. What was also particularly hawkish about Brainard’s speech, had been the acknowledgment that the balance sheet unwind will lead to more policy tightening than had been reflected in market pricing. As such, money markets have repriced higher to forecast as much as 225bps worth of tightening.
Fed Monetary Policy Tightening Outlook
Source: Refinitiv
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Looking ahead, the main focus will be on the FOMC minutes. However, with talk of a 50bps rate rise alongside quantitative tightening at the next policy meeting, eyes will be on whether there are any additional details on how QT will look. My view is the details will be released at the May meeting and thus the FOMC minutes are unlikely to provide much in the way of volatility for risk assets.
As mentioned above, risks remain tilted to the downside for the US equities. Near term support will be watched with the 200DMA situated at 4490, where a closing break below opens the door towards 4400.
S&P 500 Chart: Daily Time Frame
Source: Refinitiv
| Change in | Longs | Shorts | OI |
| Daily | 6% | -5% | 1% |
| Weekly | 7% | -10% | -2% |
