REUTERS/Brendan McDermid

• The Treasury yield curve on the 2 and 10 year notes is at its deepest inversion in over 40 years.
• The yield curve is a notorious predictor of a recession, and preceded the downturns of 1990, 2001, and 2008.
• That means it’s hard to argue stocks will have strong performance in the near-term, DataTrek said in a note.

The difference between the yield on the 2 and 10-year Treasury notes is the widest its been in about four decades, flashing a notorious warning of a looming recession and a possible sign of more pain to come for stocks, DataTrek said in a note on Monday. 

The the 2-year yield has surpassed the yield on the 10-year note for almost a year now, and that inversion has only deepened recently. The 2-year was trading at a yield of 4.241% Monday, compared to a yield of 3.578% on the 10-year. 

It’s the steepest inversion since the early 1980s, and potential grim omen for the economy, as an inverted yield curve has been a notoriously reliable indicator of a recession in the near-term. 

Recession fears have been elevated since the Federal Reserve aggressively tightened policy last year to rein in inflation, raising interest rates by 425-basis-points in 2022. Prices have cooled slightly from highs last summer, but commentators fear that raising rates past their current level could overtighten the economy into a recession.

The central bank is expected to raise interest rates to 5.1%, tacking on another 75-basis-points from current levels. But the 2-year Treasury yield, which is most sensitive to Fed policy, has been on the decline since early November, which could mean the bond market thinks the Fed is bluffing with its promise of more rate hikes, Fundstrat said last month.

“The bond market is discounting Fed policy that is marginally more restrictive than the end of 2022, and many investors will see this as increasing the odds of a 2023 recession. History supports their concern,” DataTrek co-founder Nicholas Colas said in a note on Monday. He noted that an inversion in the yield curve that preceded the recessions of 1990, 2001, and 2008.

The inverted 2-10 spread doesn’t mean a recession is inevitable, but the economy is now more vulnerable to an exogenous shock, Colas warned, and stocks should brace for some more pain as well.

“It is hard to argue for a strong equity market or valuations when 2s yield [is] this much more than 10s, simply because we know this differential signals an inherent brittleness in the US economy,” he added. 

• Weavers in Varanasi, India make Banarasi silk saris the traditional way. 
• Mohammad Afzal Ansari has been weaving for over 40 years. 
• He weaves real gold and silver zari threads into silk on a handloom that’s over 200 years old.

Banarasi silk saris flourished in the city of Varanasi in India in the 16th century. Weavers like Mohammad Afzal Ansari learned the craft from older generations. Saris are made by weaving silk on handlooms and adding intricate motifs made with real gold and silver zari threads. However, cheaper, machine-made saris being sold as authentic Banarasi saris have threatened the craft.

We visited Varanasi to see how this centuries-old tradition is still standing.

Even as we wait for word on whether or not Steve Bannon was involved in plotting yesterday’s pathetically weak failed coup attempt in Brazil, it’s worth keeping in mind that Bannon very publicly incited that coup before and during the fact. Given that Bannon isn’t yet behind bars, we’re seeing the predictable chants of “he’s getting away with it all” or “he’s gotten away with it all.”

But let’s take a look at the facts. Steve Bannon has been convicted and sentenced to prison on federal charges and is currently appealing that prison sentence. He’s been indicted on serious state charges that would send him to prison for much of the rest of his life, and he’s awaiting trial on those charges. He’s potentially facing more federal charges from Special Counsel Jack Smith. And that’s before getting to the question of whether Brazil might end up indicting him and seeking extradition. If anything the United States might decline to extradite Bannon to Brazil because of how many criminal charges he’s already facing in the United States.

Steve Bannon isn’t “getting away with it all.” He’s hanging on by a string. He’s already been sentenced to prison. He’s just exhausting the appeals that he has left. Perhaps our system shouldn’t work this way but it does. If anything, Bannon is just using the Brazil situation to try to raise a bit more money for his legal defense. He’s going to need it. The rest of his life is going to be all about more criminal charges, more criminal trials, more criminal convictions, and eventually rotting in prison. What we’re seeing at this point is just last ditch flailing.

The post Hanging on by a thread appeared first on Palmer Report.

The U.S. House of Representatives will vote on Monday on the rules that will govern it for the next two years, in a first test of newly elected Republican Speaker Kevin McCarthy’s ability to wrangle his caucus.

The legislation includes several changes that will limit McCarthy’s power, including allowing a single lawmaker to call for his removal at any time and changes meant to sharply limit spending, concessions that McCarthy agreed to win support from right-wing hardliners for his leadership bid.

Republicans have a narrow majority of 222-212 in the House, after winning fewer than expected seats in November’s midterm elections. This has amplified the hardliners power, and raised questions about how the divided Congress, where President Joe Biden’s Democrats still control the Senate, will function.

Lawmakers face critical tasks in the year ahead including addressing the federal government’s $31.4 trillion debt limit. Failure to do that, or even a long standoff, would shake the global economy.

Other changes include a 72-hour waiting period between when a bill is introduced and when it can get a vote, a cap on government spending at 2022 levels and the creation of a committee to investigation the Justice Department.

At least one Republican, Representative Tony Gonzales, has said he plans to vote against the package due to proposed limits on defense spending, which he told CBS on Sunday was “a horrible idea.”

“When you have aggressive Russia and Ukraine, you’ve got a growing threat of China in the Pacific… how am I going to look at our allies in the eye and say, I need you to increase your defense budget, but yet America is going to decrease ours?” he said.

Democrats are expected to vote against the package. The vote is scheduled to take place on Monday night.

Brazilian police amassed at a camp of supporters of far-right former President Jair Bolsonaro in the capital on Monday, a day after rioters launched the worst attack on Brazil’s state institutions since its return to democracy in the 1980s.

After thousands of Bolsonaro’s backers stormed Congress, the Supreme Court and the presidential palace on Sunday, hundreds of police in riot gear and some on horseback deployed at the pro-Bolsonaro camp outside Brasilia’s army headquarters, while soldiers in the area withdrew, Reuters witnesses said.

President Luiz Inacio Lula da Silva, Bolsonaro’s leftist rival who took office on Jan. 1 after a narrow October election win, promised to bring those responsible for the violence to justice, after demonstrators broke windows and furniture, destroyed art work and stole guns and artifacts.

Lula, who was back at work at the Planalto presidential palace, planned to meet his defense minister and armed forces commanders to discuss the attacks that recalled the assault on the U.S. Capitol two years ago by backers of former President Donald Trump.

U.S. President Joe Biden joined other world leaders in condemning Sunday’s riots, calling them “outrageous”, while Bolsonaro who is now in Florida denied inciting his supporters and said the rioters had “crossed the line”.

Pro-Bolsonaro truckers, who have caused havoc on Brazil’s highways for weeks, held more protests through the night.

A toll road operator for the BR 163 highway that cuts through Brazil’s top grain producing state Mato Grosso reported several blockades that were cleared by dawn. Police said blockages on another highway in Parana state were also cleared.

Supreme Court Justice Alexandre de Moraes ordered the governor of Brasilia removed from office late on Sunday for 90 days over alleged security failings and demanded that social media platforms Facebook, Twitter and TikTok block accounts of users spreading anti-democratic propaganda.

Facebook parent Meta (META.O) said on Monday it was removing content supporting or praising the weekend actions. Telegram, TikTok, Twitter and YouTube did not immediately respond to requests for comment.

Lula, a former union organizer who was also president from 2003 to 2010, said the local militarized police force that reports to Brasilia Governor Ibaneis Rocha, a former Bolsonaro ally, did nothing to stop the protesters advancing.

Lula decreed federal intervention of public security in the capital and promised exemplary punishment for the leaders of the “fascist” assault that was aimed at provoking a military coup that could restore Bolsonaro to power.

“All the people who did this will be found and punished,” Lula told reporters from Sao Paulo State.

He blamed Bolsonaro for inflaming his supporters after a campaign of baseless allegations about election fraud after the end of his rule marked by divisive nationalist populism.

From Florida, where Bolsonaro flew 48 hours before his term ended, the former president rejected the accusation. He said on Twitter that peaceful demonstrations were democratic but the invasion of government buildings “crossed the line.”

The assault raised questions among Lula’s allies about how security forces in the capital were so unprepared for rioters who had discussed their plans on social media for days.

The occupation of the government buildings had been planned for at least two weeks by Bolsonaro’s supporters in groups on messaging platforms such as Telegram and Twitter, yet there was no move by security forces to prevent the attack, called by one group “the seizure of power by the people.”

Police retook the damaged public buildings in the futuristic capital after three hours and dispersed the crowd with tear gas.

Justice Minister Flavio Dino said 200 demonstrators had been arrested, although that number is expected to rise.

Dino said investigations aimed to uncover who financed the several hundred buses that brought Bolsonaro’s supporters to Brasilia and question the suspended Brasilia governor.

Bolsonaro faces legal risks from several investigations before the Supreme Court in Brazil and his future in the United States, where he traveled on a visa issued only to sitting presidents, is in question.

“Bolsonaro should not be in Florida,” Democratic Congressman Joaquin Castro said on CNN. “The United States should not be a refuge for this authoritarian who has inspired domestic terrorism in Brazil. He should be sent back to Brazil.”

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Mexican President Andres Manuel Lopez Obrador and his U.S. counterpart Joe Biden will discuss economic integration, immigration, climate change and combating drug gangs later on Monday, Mexican foreign minister Marcelo Ebrard said.

Ebrard was speaking at a news conference alongside Lopez Obrador after Biden’s arrival in Mexico City on Sunday evening for a North American leaders’ summit this week.

Lopez Obrador accompanied Biden in a limousine from the airport to his hotel and said the two during the journey touched on some of the issues they would discuss on Monday, including regional economic integration and migration.

Lopez Obrador is hosting Biden and Canada’s Prime Minister Justin Trudeau between Monday and Wednesday for the first summit between the three since late 2021.

The North American leaders are expected to seek to give new impetus to strengthening economic ties, even as a major dispute grinds on over Mexico’s energy policies which has distracted from cooperation on other issues such as immigration.

The United States and Canada say their firms have been disadvantaged by Lopez Obrador’s campaign to give control of the market to his cash-strapped state energy companies.

Lopez Obrador, a combative leftist, says his drive is a matter of national sovereignty, arguing that past governments skewed the energy market to favor private interests.

The U.S. Supreme Court on Monday rebuffed an effort by a group of Republican state officials to revive former President Donald Trump’s hardline policy that barred certain immigrants deemed likely to require government benefits from gaining lawful permanent residency.

The justices turned away an appeal by 14 Republican state attorneys general, led by Ken Paxton of Texas, of a lower court ruling against their request to mount a legal defense of Trump’s “public charge” rule after President Joe Biden’s administration stopped defending the measure and later rescinded it.

The policy was put into effect by Trump’s administration in February 2020 and ended by Biden’s in March 2021.

Paxton was joined by attorneys general from Alabama, Arizona, Arkansas, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Montana, Ohio, Oklahoma, South Carolina and West Virginia.

Trump’s administration in a 2019 rule significantly widened the definition of “public charges” who were ineligible for legal U.S. permanent residency, or green cards. The expanded restriction applied to immigrants who receive a government benefit including the Medicaid health insurance program for the poor and food stamps for more than 12 months in any three-year period.

A federal judge in Illinois vacated the rule nationwide. The judge later rejected the Republican bid to intervene, saying the request by the state officials came too late, and the Chicago-based 7th U.S. Circuit Court of Appeals last June agreed.

The Republican officials had told the justices that they should be able to defend Trump’s rule, saying it has been estimated to save states collectively about $1 billion annually.

The Supreme Court last year heard arguments over a separate bid by Republican state officials to intervene in defense of Trump’s public charge rule but ultimately dismissed the case without resolving the issue.

Biden’s administration last September adopted a narrower rule under which immigrants would be deemed public charges only when they are likely to become primarily dependent on the government for subsistence, mirroring a 1999 regulation that had been in place for two decades. Texas on Thursday filed a separate federal lawsuit challenging Biden’s rule.

Republicans have sharply criticized the immigration policies of Biden, who came into the White House vowing to undo some of the hardline rules pursued by Trump.

The U.S. Supreme Court on Monday let Meta Platforms Inc’s (META.O) WhatsApp pursue a lawsuit accusing Israel’s NSO Group of exploiting a bug in its WhatsApp messaging app to install spy software allowing the surveillance of 1,400 people, including journalists, human rights activists and dissidents.

The justices turned away NSO’s appeal of a lower court’s decision that the lawsuit could move forward. NSO has argued that it is immune from being sued because it was acting as an agent for unidentified foreign governments when it installed the “Pegasus” spyware.

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