Blowout Retail Sales Nudge Rates Higher

We’ve stuck stubbornly to our forecast for the 10Y to reach 4.75 for nearly a year, betting that sticky inflation would force the Fed’s hand. We came within 6 bps of new highs this morning after retail sales soared 0.7% (expected 0.4%) in July.

Futures held on to their lows, though the pre-opening shenanigans haven’t yet begun (keep a close eye on DXY and VIX.) We don’t expect the bulls to give up SPX’s 50-day (4443.43) without a fight.

The challenge for bears now, as back in October 2022 when the 10Y tagged our 4.26 target [see: More OPEX Games] is that we’re up against OPEX (Friday.)  Back then, it meant the 10Y’s channel collapsed and the next leg higher was postponed until after equities’ year-end run for the barn. If TPTB have their way, SPX’s 50-day backtest would be a springboard for a nice bounce.

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