Another very bifurcated day/Waller backtracks/Labor market comments from Ian Siegel and other notable quotes.

What an impressive stock market day but it was a bizarre one again as the rising tide only lifted about half the boats. While the NASDAQ closed up by 3%, there were more stocks down than up in the composite index, 1541 up, 1651 down with 187 unchanged. The Russell 2000 had the same performance with 984 down and 933 up. The market has clearly made its bets that big cap stocks in this environment of a high cost of capital, elevated labor costs and profitability challenges for most except the select few can better handle this investing backdrop than the smaller companies. Also, there seem to be fewer names that can generate the revenue and earnings growth that satisfies investors and it's hard to beat Nvidia's growth rates for example. 

Back in November 2023 Fed Governor helped to stoke a further year end rally by saying that if inflation moderated "for several more months...three months, four months, five months...we could start lowering the policy rate just because inflation is lower. It has nothing to do with trying to save the economy. It is consistent with every policy rule. There is no reason to say we will keep it really high."

Fast forward to last night and he said "The strength of the economy and the recent data we have received on inflation mean it is appropriate to be patient, careful, methodical, deliberative - pick your favorite synonym. Whatever you pick, they all translate to one idea, what's the rush?"

He'll wait to see if the January inflation rise was an outlier or not and that "in the absence of a major economic shock, delaying rate cuts by a few months should not have a substantial impact on the real economy in the near term... And I think I have shown that action too soon could squander our progress in inflation and risk considerable harm to the economy."

In response the 2 yr yield is up another 2 bps and by 53 bps this month to 4.74%, the highest since late November. The 10 yr yield is up to 4.34%. This higher rate story I believe is far from over, particularly for the long end where I expect another trip to 5.00%.