Commodities pulling back from key resistance levels and failing to break higher likely signals a weakening global economy.

The upside breakout in bond yields creates a headwind for the S&P 500.

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We discussed the historical context to Fitch's warning about potential debt rating downgrades for large US banks.

Implied equity volatility as measured by the VIX Index remains subdued at 15.80.  The threat of waterfall decline in equity markets seems low as long as the VIX remains below 22.

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The recent repricing in Treasury yields follows last week's increased auction sizes and lackluster demand possibly linked to the US sovereign credit rating downgrade.

Cooler than expected June CPI and PPI from July made disinflation a major part of the consensus narrative.  

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We continue to expect a brief period of weakness for the SPX based on ongoing policy ambiguity during a relative catalyst vacuum.

The Fed will likely focus on the MoM CPI numbers knowing that base effects skew the YoY numbers higher for the time being. Consensus is looking for both headline and core CPI to rise 0.2% MoM in July.

The recent widening in credit spreads should be closely followed in the days ahead. Recession risk has been priced out of equity markets, but rising recession risk usually starts in credit markets.

Last week's pullback in equity markets was driven by a volatile week in the bond market.