Retail Sales Clobber Stock Prices

Yesterday, Fed Chair Jerome Powell was more hawkish than expected. He reiterated that the Fed needs to be more restrictive to moderate inflation, and to remain restrictive until the job has been done. The FOMC Summary of Economic Projections now sees the federal funds rate rising from 4.25%-4.50% currently to 5.00%-5.25% next year and staying there.

Meanwhile, the 2-year Treasury note fell to 4.24% reflecting market expectations that the federal funds rate will be lower next year. The 10-year minus 2-year Treasury yield spread remains solidly in negative territory at -60bps.