A quiet macro day in the US – mixed bag of regional Fed survey data (Richmond Manufacturing good, Richmond Biz Conditions bad, Dallas Services bad) and plunging mortgage apps) – followed a hotter than expected inflation print in Germany, which sparked a further hawkish shift lower in rate-cut expectations with 2024 falling back to a 50-50 coin toss for 2 cuts or 1; and 2025 tumbling to less than 3 more cuts…Source: Bloomberg Treasury yields surged higher, led by the long-end (2Y +2bps, 30Y +7bps)…Source: Bloomberg…steepening the curve even more…Source: Bloomberg2Y Yields ramped within 0.25bps of 5.00%, erasing all the gains from payrolls and CPI…Source: BloombergAnd higher yields are starting to hit stocks. Today was relatively unusual for recent times with no big BTFD bounce back after almost non-stop selling from the cash close last night. Small Caps lagged on the day with S&P and Nasdaq the best looking horses in the glue factory. The cash open offered a little blip higher but that was sold into…The Dow broke below its 50- and 100-DMA and Small Caps broke below their 50DMA…‘Most Shorted’ stocks were monkeyhammered lower… again…Source: BloombergBut, of course, MAG7 stocks levitated…Source: Bloomberg…as NVDA hit another new record high…Since NVDA’s earnings, everything but AI has been sold…Source: BloombergThe dollar followed rates higher, back near one-month highs…Source: Bloomberg…which hit gold…Source: Bloomberg…sent oil lower with WTI back below $80…Source: Bloomberg…and bitcoin also fell back below $68,000 (despite the Blackrock flows news)…Source: BloombergEthereum slipped back below $3800….Source: BloombergFinally, while financial conditions remain drastically loose (especially relative to Fed rates), we note that they are starting to tighten…Source: BloombergWe’ve seen this before a few times this year – so let’s not hold our breath, but The Fed surely wants the market ‘tighter’ than it is before it starts actually ‘easing’.More By This Author:How The War Redirected Ukraine’s Grain ExportsBlackrock Surpasses Grayscale As World’s Largest Bitcoin ETFYields Surge After Ugly 2Y Auction As Foreign Demand Tumbles