10 things before the opening bell
Good morning. Today we're breaking down why some analysts are pointing to one market indicator as a reason for an imminent recession. Plus, there's a chart that shows why inflation is hitting car owners and car buyers particularly hard.
Let's get into it.
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1. The bond market is close to flashing a key indicator of a coming recession. The yield curve is on the verge of becoming inverted, with the likelihood of a downturn growing since the Fed raised interest rates. Short-term rates are inching up, and if they surpass longer-term rates, it usually means markets are out of whack.
Bank of America said Friday that the 10-year Treasury yield has fallen below the 2-year rate ahead of eight of the last 10 recessions.
As of Monday, the US 10-year Treasury rate was 2.1%, while the US 2-year Treasury rate was 2.3%. Yields on the 5 and 10-year notes, meanwhile, are already slightly inverted.
But it's worth noting an inversion does not guarantee a recession as a standalone indicator, said the bank. Other factors play a role.
Plus, there's a wide lead time. Since 1956, it's taken between five and 24 months for a US recession to start after a yield curve inversion.
Meanwhile, top economist Mohamed El-Erian warned in an interview Monday that he's anticipating a policy mistake from the Fed, and suggested investors de-risk while the market is rallying.
In other news:
2. Global shares have shaken off the initial hit from a hawkish Powell. Oil has eased below $120 again as the EU remains split on a Russian export ban. Here's what's happening on the markets so far today.
3. Earnings on deck: Adobe, Carnival Corp, and Filo Mining, all reporting.
4. This batch of beaten down tech stocks with strong cash flow are primed for a rebound, according to Bank of America. These smaller tech firms are potential bargains because they're profitable and deliver steady cash returns — see the list of 15 here.
5. Russia's economy will shrink a huge 10% this year, said Goldman Sachs. The bank said Western sanctions can cause Russian exports to drop 10% and imports to tumble 20% this year. This would be the nation's worst contraction since the dark days of the 1990s.
6. The co-founder of ethereum, Vitalik Buterin, sounded off on Bored Ape Yacht Club NFTs. He said the garish digital collectibles contribute to the public perception of crypto as a place to show off obscene amounts of wealth. "The peril is you have these $3 million monkeys and it becomes a different kind of gambling."
7. Bill Gross lost money and sleep betting against "nonsense" GameStop and AMC. But now the Pimco co-founder is up as much as $20 million. He's gotten ahead after sticking to his short strategy over the past 18 months while the meme stock frenzy has lost its steam.
8. Alibaba has just announced a huge share buyback. Here's why Chinese internet stocks pulled off enormous gains last week. Insider spoke to three experts about what's going on — and why it makes sense to be bullish even after an epic rally.
9. A hedge-fund strategist outlined four bearish factors signaling further pain ahead in stocks. "A more substantial equity and high yield corporate credit de-risking is probably in the cards," says Peter Cecchini. He advised selling on any upcoming rallies.
Curated by Phil Rosen in New York. (Feedback or tips? Email prosen@insider.com or tweet @philrosenn.)