Treasurys Rally On Risk-Off Mood

Bonds rally, stocks slump after bank executives share concerns. Treasury yields fell across a flattening curve today, the 2-year yield falling ~2bps to 4.37% and the 10-year yield decreasing ~4bps to 3.53%. The move came amid warnings from bank executives about the effect that rate hikes will have on their earnings, with fears of an imminent recession at the forefront. Lauren Goodwin of New York Life Investments commented on the situation, saying that the bottom for equities has not yet been reached, as “earnings have not yet adapted to a recessionary environment.” Equities were hurt by this sentiment, with the S&P 500 and NASDAQ realizing losses of 1.44% and 2.00%, respectively.

Wall Street banks mull job cuts as outlook worsens. Morgan Stanley announced today that they will be cutting 1,600 jobs, 6% of its global workforce, and that an impending recession will slow hiring. Goldman Sachs and Bank of America echoed the sentiment, with executives planning to slow hiring to manage headcount. These cuts follow layoffs and hiring freezes at large tech companies such as Meta, Amazon, and Apple, as well as announcements from Intel, PepsiCo, and many others. After rapid hiring in 2021, a period of loose liquidity, these announcements may be a reflection of the increasing realized impact of Fed hikes on a strong labor market.

Day ahead. Sessions have been quieter with the Fed blackout, but keep an eye out for consumer credit and unit labor cost data, released tomorrow at 8:30 AM ET.