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.
10. Inflation is getting harder to avoid. From the dealership to the gas pump, even owning a car is presenting steeper challenges. Gas is spiking, and the price of buying a new car has climbed more than 14%. See how inflation is impacting other parts of everyday life.
Curated by Phil Rosen in New York. (Feedback or tips? Email prosen@insider.com or tweet @philrosenn.)