After last week's ridiculous FOMC announcement which forced even such "party line" commentators as Steve Liesman to ask Yellen if the Fed has lost all credibility after its dots tumbled despite surging core inflation and a mandate low unemployment rate, one can be forgiven if all they laugh at the latest Fed "forecast."
Despite the reversal (lower) in stocks, bond prices are tumbling (yields surging) this morning, seemingly catalyzed by yet another sudden surge in crude oil prices. Algos appear to have read comments on shale production coming back as bullish - well if they are producing more, there must be more demand right? At the same time - starting around 530ET, stocks are bonds began to both sell off, unwinding the post-Fed "QE Trade" bounce.
Crude is rallying as bonds dump...
After January's hopeful spike to 6 month highs, Chicago Fed's National Activity Index plunged back into contraction (at -0.29) near 2 year lows.
A shockingly large 58 of the 85 individual indiators within the index made negative contributions to the overall index which printed notably below the lowest economist's expectations.
The news is out.. and it's disappointing..
One month ago, as we pounded the table on the biggest threat to the fundamental case for oil, namely that even a modest rebound in oil prices could unleash another round of production by the "marginal", US shale oil producers, we warned that a rebound in the price of oil as modest as $40 per barrel, could be sufficient to get drillers to resume production.