Daily Stock Market Recap per ZH

NVDA Adds Record Market Cap; Everything Else Dumps As Debt-Ceiling Idiocy Continues
THURSDAY, MAY 25, 2023 - 04:00 PM

Nvidia... that is all.

Yes there was macro data: GDP second look improved, jobless claims shitshow due to MS fraud revisions, pending home sales disappointed, Kansas City Fed better than expected; and some Fed Speak (Boston's Collins sees a 'pause' - like everyone else), but really this was all about Jensen Huang (who's personal; wealth jumped over $8 billion today).

From the open, the day was all about one stock - NVDA, soaring 25% or so and adding just under $200 billion in market cap - that is 2 Intels! - and from the Oct 2022 lows, NVDA has added $665 billion in market cap...



Source: Bloomberg

That is the largest single-day market cap gain for any stock in US equity market history...



NVDA added more market cap today than the total market cap of 472 of 500 S&P companies, including:

• Cisco (197.3BN)
  
  
• Thermo Fisher ($197BN)
  
  
• Accenture ($190BN)
  
  
• AMD ($174BN)
  
  
• T-Mobile ($168BN)
  
  
• Adobe ($168BN)
  
  
• Nike ($166BN)
  
  
• Disney ($166BN)
  
  
• Netflix ($162BN)
  

Bear in mind that it's unclear how many jobs AI will have to replace to make the "$1 trillion data center" investment viable but Goldman has estimated 300 million middle/upper class jobs in US/Europe will be made obsolete... but at least your pension will be higher before you face permanent ejection from the workforce.

But, as the following Advance/Decline line for the Nasdaq shows, NVDA was practically alone...



Source: Bloomberg

On the day, Nasdaq exploded higher (obviously), Small Caps lagged notably with The Dow unch and the S&P gaining helped by NVDA durr...



Notably 0-DTE traders were hell-bent on getting some upside traction going in the S&P with three big impulses during the day...



Source: SpotGamma

Small Caps suffered as banks were sold again ahead of tonight's Fed bailout data...



The equal-weight S&P 500 ended the day unch, while the cap-weight was up around 1%...



For some context with regard the concentration in markets, this is the seasonally worst relative performance of the equal-weight S&P to the cap-weight S&P in at least 30 years...



Source: Bloomberg

The divergence in performance today between Small Caps and Nasdaq was the largest since Nov 2020...



Source: Bloomberg

Treasuries were dumped hard today, because why make 4 or 5% risk-free when you can pile into a tech stock at 175x Trailing P/E? The short-end was clubbed like a baby seal relative to the long-end today (2Y +15bps, 30Y +1.5bps) and the 2Y is ugly on the week...



Source: Bloomberg

The 2Y Yield rose back above 4.50%, back ast its highest since the middle of the SVB bank collapse crisis...



Source: Bloomberg

The yield curve (2s10s) flattened significantly, to its most inverted since the SVB crisis lows...



Source: Bloomberg

As Nomura's Charlie McElligott noted earlier, the cross-market is real-time pricing-in debt deal optimism (@Punchbowl reporting “Rs expect the compromise will come together sometime in the next few days”) at the same time that the regional banks deposit-flight story remains (temporarily) quiet - which means that the “left tail” of the distribution being that “~150bps – 250bps emergency cut” type of calamity scenario is seeing its market implied probability crater... all while “higher for longer” (even holding terminal through end of year) picks up Delta, with the debt-deal compromise being expected in the next few days, allowing the Fed to get back to the economic task at hand.

The market can then too price-in the now very-well socialized concerns with regard to the back half of year “liquidity drain” which is set to accelerate powerfully both in US and Europe, as outlined recently where again, the danger feeds into “higher interest rates” but this time, largely from the risk of

1) TGA rebuild / T-Bill “supply shock” / “reserve drain” which can then bleed-into a “crowding-out” across the risk-curve...

...especially when occurring in conjunction with

2) aforementioned “higher for longer” Fed,

3) QT,

4) ongoing Deposit flight into MMF / RRP as additional siphoning of Reserves,

5) consumer and corporate drawdown on remaining pandemic “excess savings,”

6) expiration of student loan moratorium, and

7) a monster European TLTRO repayment in Jun and 8) APP reinvestment cessation in July

And that is all very evident in the dramatically hawkish trend in STIRs...



Source: Bloomberg

The dollar rallied for the 9th day of the last 11 to its highest since 3/17/23 as flight cash continues...



Source: Bloomberg

Japanese Yen fell to 140/USD for the first time since 11/23/22...



Source: Bloomberg

Gold was puked back to two-month lows...



Oil tumbled after Russia poured cold water on OPEC+ production cut "ouchy" threat...



The "confusing triangle" continues its trilemma-y ways...



Source: Bloomberg

Finally, we note that the last time Nasdaq was this high relative to small caps was the peak of the dotcom bubble...



Source: Bloomberg

..probably nothing, right?

 

Tech Tops, Dow Drops, Bonds Flop As Hawkish Inflation Signals Send Rate-Hike Odds Soaring
FRIDAY, MAY 26, 2023 - 04:01 PM

US economic data surprised to the upside this week - but most notably in terms of inflation signals that showed now signs of trending lower...



Source: Bloomberg

And while core inflation NOWCAST did drop a smidge, it remains a mile away from The Fed's mandated levels - and the drop has stalled...



Source: Bloomberg

That saw the market very hawkishly reprice the entire short-term rate curve with 100% odds of another hike by July and pricing in rates being only 25bps lower by Jan 2024 (from 125bps lower right after the FOMC)...



Source: Bloomberg

But, realistically, the drivers of action this week in markets were debt-ceiling headlines and the AI-bubble's euphoria stage.



The Debt-Ceiling Fear-o-Meter soared to start the week but eased a little today (even though a deal remained absent)...



Source: Bloomberg

And that helped stocks a little into the weekend, but the real driver was NVDA and any mention of AI that sent Nasdaq literally to the moon



0-DTE traders were caught offside in NVDA with massive covering of puts this morning and then buying of calls late on...



Source: SpotGamma

Just one thing to remember, we've seen these massive hoarding orders of chips before (during COVID)...



Source: Bloomberg

And thanks to the knock-on from FOMO-chasing AI, Nasdaq is up over 5.5% from Wednesday's close. The Dow ended the week down 1% with Small Caps and the S&P around unch...



On a side-note, 0-DTE traders were selling the whole day with massive negative-delta flow



Source: SpotGamma

Tech - obviously - massively outperformed this week, with only Consumer Discretionary joining them in the green. All other sectors were red on the week with Staples and Financials lagging....



Source: Bloomberg

This was the biggest weekly outperformance of Nasdaq over The Dow since early March (and this is the 5th week that Nasdaq has outpaced The Dow)...



Source: Bloomberg

The last time Nasdaq traded at more than 8x Small Caps did not end well...



Source: Bloomberg

The equal-weighted S&P 500 is now underwater for the year while the cap-weighted S&P is up around 10%...



Source: Bloomberg

This is the biggest divergence in at least 30 years for this time of year...



Source: Bloomberg

The 3-month performance spread between the S&P 500 and the S&P 500 Equalweight is the widest it has been since December 1999. pic.twitter.com/EJq1vVIBGA

— Bespoke (@bespokeinvest) May 25, 2023
Regional Banks squeezed up to resistance but faded back later in the week ahead of tonight's deposit data...



1D-VIX surged higher today, once again recoupling with VIX as the debt ceiling doubts remain...



Source: Bloomberg

Treasury yields were dumped all week, but today saw some buying come back into the long-end, leaving the short-end (2Y) up 30bps on the week while 30Y yields were up only 3bps...



Source: Bloomberg

And that shift led to the biggest weekly curve (2s10s) flattening since April 2022 to its most inverted since the peak of the SVB crisis...



Source: Bloomberg

Before we leave bond land, there's this - the traditional relationship between higher yields and tech performance (long-duration equities) has completely blown up...



Source: Bloomberg

The dollar rallied for the 3rd straight week (5 of last 6), but ended the week with selling pressure...



Source: Bloomberg

Bitcoin ended the week unchanged, hovering around $26-27,000...



Source: Bloomberg

Oil managed modest gains on the week but NatGas was clubbed like a baby seal as copper and PMs



Source: Bloomberg

Overall, commodities are screaming recession... stocks not so much (or are stocks screaming recession-implied QE?... in which case why aren't commodities doing the same?)...



Source: Bloomberg

Finally, as optimism builds of a debt-ceiling deal, remember, remember, the summer of 2011...



Source: Bloomberg

Will we get 'sell the news' next week on a short-term deal?... then a bounce, then a reality check that the short-term extension won't last?

 

AI-Mania Melt-Up Accelerates But Bonds, Bullion, & Bitcoin Jump
TUESDAY, MAY 30, 2023 - 04:01 PM

A debt-ceiling deal? Maybe... The T-Bill curve compressed a bit (but not totally)...



And USA sovereign risk eased a smidge...



Source: Bloomberg

On the macro-economic side, home prices were steady (but down YoY NSA), consumer confidence declined (with labor market signals weaker), and Texas manufacturing shit the bed.

On the micro side, it was all about NVDA as talk of an AI Supercomputer over the weekend pushed the giant chip company above a $1 trillion market cap...



Source: Bloomberg

NVDA supported Nasdaq and S&P.

Around 1330ET, Richmond Fed's Tom Barkin dropped a clanger, admitting that "inflation will be more stubborn than many hoped," adding that "however, I look at it, the inflation rate is too high." That legged the broad equity markets lower again, dragging Nasdaq down to almost unchanged (and NVDA down to $400) before the machines got back to work and lifted things.

By the close, Dow and Small Caps were the laggards, S&P hovered around unch, while Nasdaq clung to gains



0-DTE traders started pressuring NVDA shortly after the open but also defended the $400 level and sparked a market ramp late on...



Source: SpotGamma

The machines defended NVDA $400 like crazy today ($404.50 ish was the threshold for $1 trillion market cap)...



C3.AI soared over 30% today (ahead of its earnings tomorrow)...



...on a massive gamma squeeze...



We also note that index overlay selling hit the Nasdaq BEFORE NVDA rolled over...



Oh, and then there's this shitshow in market breadth... probably nothing right?



Source: Bloomberg

Bonds were bid all day (after yesterday's time off) with the short-end outperforming (2Y -11bps, 30Y -6bps)...



Source: Bloomberg

Rate-hike expectations for June, July, and September all rose notably today - especially July which is now pricing fully a 25bps hike...(NOTE that at the other end of the STIRs curve, expectations for rates in Jan '24 dovishly dropped today)



Source: Bloomberg

The dollar chopped around all day but ended slightly lower...



Source: Bloomberg

Bitcoin rallied over the weekend on debt ceiling deal news and is up notably since Friday's close...



Source: Bloomberg

Interestingly, US wheat prices fell below those of corn for the first time since 2013...



Source: Bloomberg

Oil prices tumbled with WTI breaking back below $70...



Gold ramped back up to recent resistance today...



Finally, two fun charts to think about.

First, the last time the Nasdaq 100 (mega-cap tech) was this high relative to the Russell 2000 (small caps), things did not end well...



Source: Bloomberg

And second, what if this AI-gasm is all about dragging forward future sales (a la COVID supply chain corruption)?



Source: Bloomberg

Just some food for over-exuberant, chasing thought.

 

AI-Mania Meltup In May Hides Recession Signals From Commodities & Credit Curves
WEDNESDAY, MAY 31, 2023 - 04:00 PM

Early in the day (and overnight) The Fed's Barkin and Mester profused their usual hawkish mantras, expressing no need to pause yet, but later in the day .

• Barkin - No Pause - “I’m looking to be convinced that demand is in fact coming down, and that that will then start to bring inflation down... However I look at it, it just looks like inflation is too high.”
  
  
• Mester - Hike - “I would see more of a compelling case for bringing [rates] up ... and then holding for a while until you get less uncertain about where the economy is going.”
  
  
• Collins - No Pause - "...the Fed is intent on reducing inflation that’s just simply too high."
  
  
• Jefferson - Pause - "...skipping a rate hike at a coming meeting would allow the Committee to see more data before making decisions about the extent of additional policy firming."
  
  
• Harker - Pause - “I am definitely in the camp of thinking about skipping any increase at this meeting.”

But combining all that with Beige Book and rate-hike expectations dropped today...



However, on the month, rate-change expectations are basically unchanged (modestly more hawkish at the longer-end), with The Fed's statement driving a dovish dive early on but all the FedSpeak since has reversed that entire move, with a 25bps hike by July now fully priced in...



Source: Bloomberg

Weak Chicago PMI was trumped by strong JOLTS data on the day and pushed US Macro surprise data higher for May...



Source: Bloomberg

Debt-Ceiling drama is fading fast with USA CDS compressing...(though still elevated)



Source: Bloomberg

Nasdaq is the only major US equity index to end higher in May (up around an astonishing 8%) while The Dow was the big laggard, down around 4%. The S&P ended unchanged...



Source: Bloomberg

Energy stocks were clubbed like a baby seal in May while Tech took off. Today saw significant bank weakness which pulled them notably lower on the month...



Source: Bloomberg

May also saw a massive divergence between cap-weight and equal-weight portfolio performance as breadth narrowed dramatically...



Source: Bloomberg

Meme-stock mania struck in May with Goldman's 'high retail sentiment' basket soaring 18%...



Source: Bloomberg

But it was AI that dominated with NVDA the darling, soaring around 40% in May (though we note today's decline from yesterday's record high is the biggest daily drop since early Feb). NVDA is down almost 10% from yesterday's highs...



That weakness dragged all US majors into the red for the week with small caps weakest...



Some other notables include BUD getting slammed



Source: Bloomberg

And Target was trounced...



Source: Bloomberg

Treasury yields were all higher in May with the short-end notably underperforming (flattening the yield curve significantly)...



Source: Bloomberg

The dollar rallied hard in May (after an initial drop) up to two month highs...



Source: Bloomberg

Crypto was mixed with Ethereum down 8% in May and Biotcoin down 1.5% as Ripple rallied...



Source: Bloomberg

Bitcoin's suffered its worst month since Nov 2022 (after 4 monthly gains in a row)...



Source: Bloomberg

Copper and Crude were the ugliest commodities in May - yelling recession. NatGas was lower as were PMs...



Source: Bloomberg

WTI suffered its biggest monthly drop since Nov 2021 as China's rebound disappointed



Gold ended back below $2000, but well above the March lows...



Finally, one has to wonder how long this divergence can last with commodities, real yields, the Treasury curve, and dollar all opposing the exuberance of the AI-driven mega-cap tech-gasm...



Source: Bloomberg

Don't they realize that the other companies in the world - that are not seeing their share price rise - are the clients from which the future revenues for AI firms are supposed to come?

Are we near peak AI-bubble (echoing the COVID-supply-chain/crypto craze from 2021)...



Source: Bloomberg

Can't be, right?

 

Bonds & Bullion Bid As Fed 'Pause' Narrative Builds; Stocks Soar On Massive Squeeze
THURSDAY, JUN 01, 2023 - 04:01 PM

The labor market continued to show resilience today (claims and ADP solid) ahead of tomorrows payrolls print (but wage growth slowed) but job gains were fragmented. At the same time, the manufacturing side of the economy continued to deteriorate significantly (along with prices), productivity was revised ugly, but construction increased more than expected. So take your pick on that smorgasbord.

FedSpeak continued to push the idea of a skip/pause in June with Phily Fed's Patrick Harker saying “I do believe that we are close to the point where we can hold rates in place and let monetary policy do its work to bring inflation back to the target in a timely manner.

But St. Louis Fed President Jim Bullard commented that interest rates are now "at the low end of what is arguably sufficiently restrictive given current macroeconomic conditions" in an essay posted on his bank's website.

Putting all that into the bowl and the market adjusted dovishly with rate-hike expectations for June/July fading and rate-cut expectations for year-end rising fast...



Source: Bloomberg

Stocks were in the mood to party and it was one-way traffic higher led by Small Caps and Mega-Cap tech. Some late-day profit-taking wiped some of the lipstick off this pig (but Nasdaq and Small Caps managed 1% gains on the day still). The Dow was the smallest winner...



The Nasdaq is now on pace for its longest weekly win streak since 2020.

Stocks soared thanks to a massive short-squeeze that hit shortly after the cash open...



Source: Bloomberg

The morning saw almost no selling pressure at all but the late-day saw a big sell-program hit with around 30mins to go...



Source: Bloomberg

Notably, the squeeze was initiated by several positive delta impulses from 0-DTE traders, but at around 1200ET, 0-DTE puts were aggressively bid reversing the flow dramatically (slowing the uptrend in stocks), but the market's continued rise prompted covering of those puts and call-buying which prompted another leg higher to the short-squeeze...



Source: SpotGamma

Banks were up - perfectly recovering yesterday's plunge...



AI stocks soared intraday with NVDA up another 5% and even c3.AI bounced significantly after its overnight pukefest...



Treasuries were bid today with the short-end outperforming (2Y -6bps, 30Y -3bps), extending gains this week...



Source: Bloomberg

Bear in mind that 2Y yields are 50bps higher than they were at the last payrolls print...



Source: Bloomberg

The dollar suffered its biggest daily drop since January today



Source: Bloomberg

Bitcoin legged lower again overnight, but bounced back up to hold around $27,000...



Source: Bloomberg

Gold futures rallied today, topping $2000 briefly intraday...



Oil prices also soared today, with WTI topping $71...



Finally, Target stock started the day ugly for the 10th day in a row - the longest losing streak since the peak of the dotcom bubble in Feb 2000. A buying panic wave stepped in around 1200ET lifting it green. Then the machines battled to keep it green as selling pressure took it back into the red...



Consumer weakness? Or Conservative backlash? Ask JPM, they downgraded the giant retailer.

And then there's this...



Mission Accomplished?

 

'Goldilocks' Jobs Data Drives Stock Short-Squeeze, Hammers Bonds & Gold
FRIDAY, JUN 02, 2023 - 04:00 PM

Optimism started overnight with reports that China is considering further bailout moves for its ailing real estate industry (any stimulus is good stimulus and fully fungible, right?). Then payrolls printed hot (job gains better than expected), cold (unemployment jumps significantly), and just right (hourly earnings flat) and while rate-change expectations surged hawkishly...



Source: Bloomberg

...so did stocks! Small Caps were the week's biggest winners (ripping from down over 2% on Wednesday to up 3% by the Friday close). The rest of the majors were up around 2% on the week...



Today saw the ratio of Nasdaq-to-Small-Caps hit its dotcom record high and reverse...



Source: Bloomberg

All thanks to a huge short-squeeze in the last two days...



Source: Bloomberg

Consumer Discretionary stocks outperformed while Staples lagged but all sectors ended the week green...



Source: Bloomberg

Regional bank stocks rose for the 3rd straight week, despite ongoing deposit outflows and rising usage of The Fed's emergency bailout facilities...



Before we leave cash equity-land, it's worth noting the divergence between Nasdaq and NVDA today...



Source: Bloomberg

And the fact that amid all the euphoria, NVDA has gone nowhere since the post-earnings spike...



VIX tumbled to a 14 handle today, breaking out of the three month range from 16-20...



...basically back to pre-COVID-lockdown levels...



Source: Bloomberg

The Put/Call ratio across all stocks dropped to its lowest since March 2022...



Source: Bloomberg

...driven by a surge in call volumes...



Source: Bloomberg

Bear in mind that the last two times that the options market has been this exuberant (or ignorant of risk) have marked local tops...



Source: Bloomberg

In spite of today's selling pressure, Treasuries were bid during this holiday-shortened week with the short-end underperforming...



Source: Bloomberg

Despite today's gains, the dollar was lower this week - breaking a three week streak of gains...



Source: Bloomberg

While BTC and ETH were the least exuberant, this week saw some strong gains in altcoins...



Source: Bloomberg

Bitcoin ended the week hovering around $27,000...



Source: Bloomberg

Commodities were mixed but China headlines overnight sparked gains today in crude and copper (and iron ore). Gold, silver, NatGas (ugly slide though), and copper all ended the week marginally higher while oil fell...



Source: Bloomberg

Gold futures tagged $2000 intraweek but faded back today...



Oil prices V'd on the week with WTI back at $72 by the close...



Finally, while mega-cap tech is a long-duration asset, since the start of May, the markets have hawkishly priced higher rates (and most notably today) and tech has soared (that's not how it's supposed to work)...



Source: Bloomberg

And that decoupling is more obvious on a longer-term basis...



Source: Bloomberg

How long can that last?



But that can't happen again, right?

 

Stocks Sink As 'Appulus' Fails To Impress; Gold Up, Crypto Down, Oil Flat
MONDAY, JUN 05, 2023 - 04:00 PM

Eurozone PPI plunged overnight, but ugly US Services PMI data and slumping factory orders sent yields dramatically lower. For context, this was the worst day for the US macro surprise index since the first week of January...



Source: Bloomberg

The overnight extension of Friday's yield surge (pushing yields up by 6-8bps before the data hit) was cut short by the weakness in US macro data, plunging yields 10-14bps lower, leaving yield lower on the day by 1-2bps...



Source: Bloomberg

But the big story going into today was Apple's WWDC event. Apple Surged up to an all-time high in the morning session but as they released the VR/AR headset, the price plunged into the red for the day. 'Appulus' starts at $3499 and won't be released until 2024..



And that weighed on the broader market. Small Caps had been lagging all day, not helped by chatter of much higher capital requirements for 'mid'-sized banks. Nasdaq was leading the day until AAPL shit the bed. The S&P and Dow ended red...



S&P pushed into a 'bull market', up 20% off the October lows intraday, finding resistance at a key level though...



Source: Bloomberg

It is worth noting that the Nasdaq/Russell2000 ratio rebounded today but was unable to recover its record highs from March 2000...



Source: Bloomberg

Bank stocks tumbled on the Basel III Endgame headlines...



Additionally, early in the day, the SEC sued Binance - the world's largest crypto exchange - and that sent all cryptocurrencies lower with Bitcoin back down to $25,500...



Source: Bloomberg

The dollar ended basically flat on the day, erasing overnight gains as the weak US data hit...



Source: Bloomberg

2Y yields broke back below 4.50%...



Source: Bloomberg

Oil prices surged higher on Sunday night after Saudi's production cuts, with WTI topping $75. But as the day wore on WTI slipped lower to end basically unchanged...



Get back to work MbS!

Gold rallied on the bad econ news, ripping all the way up to pre-payrolls levels...



Finally, tick tock on the latest bubble-fest?



Source: Bloomberg

Did 'Appulus' just distract the world from AI long enough for some rational thought to return?

 

Massive Short Squeeze Sends Small Caps Soaring; Bitcoin Bounces Back Bigly
TUESDAY, JUN 06, 2023 - 04:00 PM

No US macro data today but European retail sales were not pretty and Canadian building permits plummeted. Nevertheless, US equity futures were conspicuously quiet overnight - too quiet some said. The overnight destruction of a dam in Russia-controlled region of Ukraine didn't even bother futs.

And then the cash equity market opened and a buying-frenzy suddenly hit Small Caps/Most-Shorted/Regional Banks as The Dow, S&P, and Nasdaq went nowhere.

Spot The Odd One Out!



Bear in mind - perhaps - that the last 3 days have seen Small Caps rise 5% - the last time they did this marked the local top in early Feb...



Source: Bloomberg

Regional banks extended their comeback...



Which is interesting given the massive deposit outflows they are still suffering - even if The Fed is trying to cover it up.

The Fed reports that domestic (large and small) commercial banks saw NSA flows of -$28.4 billion, while SA flows were +$102.5 billion!



As if it needs to be said, non-seasonally-adjusted deposit flows are 'actual flows'? And why do we care about 'seasonally-adjusted' deposits - they aren't real assets?

For some more context, the deposit delta (between real outflows and SA outflows) since March 1 is now $150BN+



It seems The Fed is using the 'fog of banking crisis war' - knowing this data drops late on a Friday night - to pull the wool over depositors and investors eyes.

And all on the back of another huge short squeeze. The biggest 6-day surge in 'most shorted' stocks since the local peak in early Feb...



Source: Bloomberg

Notably, the outperformance of Small Caps relative to Nasdaq is a dramatic reversal of the recent trend which lifted the ratio to the all-time high from Feb 2000...



Source: Bloomberg

VIX plunged to fresh cycle lows, tumbling to a 13 handle (lowest since Feb 2020) and VIX1D fell back to single-digits...



Source: Bloomberg

Perhaps the biggest headline of the day was the SEC suing Coinbase, which initially sent bitcoin lower (mimicking yesterday's Binance reaction), but that quickly ended and Bitcoin ripped higher, erasing all of yesterday's losses...



Source: Bloomberg

Treasuries were mixed with the long-end outperforming today (2Y +6bps, 30Y -1bp) but the day was very choppy compared to stocks.



Source: Bloomberg

The dollar ended the day unchanged after testing lower then higher intraday. The overnight rally filled the gap down from Friday's payrolls print, then the selling hit during the US session...



Source: Bloomberg

Gold managed very modest gains today, holding on to yesterday's bounce-back gains...



Oil prices dropped significantly intraday before bouncing back to end basically at pre-Saudi cut levels...



Finally, as a reminder, the world and their pet rabbit is short S&P futures right now...



Source: Bloomberg

Does make you wonder what happens next?

 

Big-Tech, Bonds, & Bullion Battered As Billionaire Druckenmiller Warns "More Shoes To Drop"
WEDNESDAY, JUN 07, 2023 - 04:00 PM

Another quiet day on the macro side in the US, though Gasoline and Distillates inventory builds hinted at a lack of demand. US mortgage apps fell for the 4th week in a row. Most notably, the US trade gap widened to its largest in six months (as overnight saw China exports collapse).

The Bank of Canada surprised with a 25bps hike (which also pushed Fed rate-hike expectations higher). While expectations remain low for June (32%), that 'pause' is expected to be only for a month with July pricing around a 85-90% chance of a 25bps hike by then...



Source: Bloomberg

Nevertheless, it was a violent day across asset-classes, and rightly so as billionaire Stan Druckenmiller told Bloomberg's Invest Conference that "this is the most complicated non-roadmap, unanalyzable situation I've ever seen in terms of having a lot of confidence in an economic prediction going forward... I just don't see a fat pitch right now."

He added:

"I think my record is as much knowing not when to play as when to play and because I deal in five or six different asset classes, I've had the luxury, if there's uncertainty in equities, usually that's a good time for bonds and currencies.

They're doing crazy things when the world's blowing up. So there's a lot of volatility there."

He was positive on one thing:

"Unlike crypto, I think AI is real... If [AI is] as big as I think it is, Nvidia is something we're going to want to own for at least two or three years. Not for 10 months,” the founder of Duquesne Family Office said.

"I actually think there is a very very real possibility and could be every bit as impactful as the internet literally going forward. And it could be a beautiful opportunity in a hard landing, just like in 01, 02 were a beautiful opportunity when the tech bubble burst, going forward for companies who have benefited from the internet, AI could be there... My firm has only been able to participate in AI by owning Nvidia and Microsoft"

But - and perhaps reflecting on the recent volatility (and apparently blind buying panic), Druck concluded:

"Our central case is there's more shoes to drop, particularly in addition to the asset markets economically."

And sure enough, today was Nasdaq's worst day since mid-April (all of a sudden long-duration stocks care about soaring rates). Biggest single-day outperformance of Russell 2000 over Nasdaq since early March 2021, and biggest 4-day outperformance since Nov 2020. The S&P was marginally lower and Dow marginally higher...



The last few days have seen Small Caps up 7% and Nasdaq down 1%...



Some notable 0-DTE action today as Nasdaq options traders attempted to ignite another leg higher...but failed...



Source: SpotGamma

0-DTE traders were actively buying puts today as the Russell 2000 soared (call action was very limited)...



Source: SpotGamma

Just as we warned last week, it appears the peak of the QQQ/RTY bubble has been reached...



Source: Bloomberg

Regional bank stocks continued their charge higher...



Despite the down-tape, TSLA rallied for the ninth straight day (longest streak since 2021) and up 13 of the last 15 days) to its highest since Nov 2022...



Goldman noted that 'soft landing' narrative is making a comeback as signaled by the very recent break-out of their 'soft-landing' basket:



Source: Bloomberg

Which is interesting because Druckenmiller remains steadfast in his view that the US economy will suffer a hard landing, but has pushed his timing off to the end of the year:

"A lot of people - because we haven't had an economic decline start yet - have changed their forecast from a hard landing to a soft landing, and a lot of others have changed it from soft landing to no landing. I haven't changed mine at all.

The fact that it hasn't happened yet doesn't change the probability if it does happen of the depth of it...

So to me, the probabilities haven't changed. It's been pushed out relative to expectations, but in no way does the fact that it hasn't started yet, change the probability of whether it's gonna be hard or soft.

I would actually argue since it's taken so long, the Fed has ended up with a higher terminal rate. And in fact, inflation gets stickier the longer it stays in the system and that it increases, not decreases, the probability of a hard landing..."

One more thing before we move on to the bloodbath in bond-land. It appears - as we noted above - tech stocks are suddenly waking up to the reality of tighter financial conditions...



Source: Bloomberg

Treasuries were clubbed like a baby seal today with the belly underperforming (but all up 10-13bps)...



Source: Bloomberg

The 10Y Yield rose to 3.80% resistance and stalled...



Source: Bloomberg

The dollar roller-coastered today, dumping overnight (and into the US day session) to test the pre-payrolls levels from Friday, before ripping back higher to unchanged...



Source: Bloomberg

The Chinese yuan hit a fresh 2023 low against the dollar...



Source: Bloomberg

The decline in the yuan follows Druckenmiller's comments:

I was in love with China until about six or seven years ago. You go over there and the energy in Shanghai was like New York on crack. It's just fantastic energy. The entrepreneurs were exciting, they were into it. And then Xi Jinping did his thing. And if you look at China and the rise of China, I think it all happened.

You had this internal capitalist system. There were a bunch of people that act like crazy New Yorkers building new businesses in a dynamic economy. But he has proved he's not a capitalist. He's definitely not a monopolist. There's only room for one monopolist in China. In his mind, that's him. Anybody that gets their heads stuck up and I honestly think he either doesn't understand why China grew and succeeded the way they did, or frankly, he doesn't care because in terms of staying in power, but I would be looking out 10 or 15 years. I just don't see it. I, unless there's a change in power there at the top I think that's gonna be a very non-dynamic economy. It's not so much the geopolitical concerns. I will say this, that if I'm right, it makes me more fearful of military action, because that's when dictators become more dangerous, is when they've gotta divert attention from the immediate problem. So what they're doing now is very stimulative. We're expecting a sugar high in some kind of robust growth there, maybe for six to nine months.

But looking out, I do not look at them as a big challenge in the United States in terms of economic power and growth.

The Turkish Lira utterly collapsed today to over 23/USD (a new record low)...



Source: Bloomberg

Gold was slammed back lower today, erasing Monday's gains...



Oil prices extended gains today - after a small crude draw (and another SPR drain) - with WTI back above pre-Saudi-production-cut levels...



Finally, we give the last word back to Stan Druckenmiller who cautioned: "There are definitely lessons to be learned [from the Dot Com bubble]. Don't get emotional, don't get crazy."



And judging by the reversal off those dotcom highs, investors are unemotionally stepping away. Who could have seen that coming?

 

VIX Dumps, Gold Pumps, Jobless Jump As Trillion-Dollar Bill-Bomb Looms
THURSDAY, JUN 08, 2023 - 04:00 PM

Tl;dr: The S&P 500 entered a new bull market (off the October lows) as jobless claims hit a 19-month high...



Bad news is good news... or just ignore the news...



The morning started with two ugly data points as jobless claims jumped dramatically (this is the biggest rise in initial claims year-to-date - ex-COVID - since 2009...



Source: Bloomberg

...and Wholesale Sales totals tumbling into the red YoY (a strong recession signal)...



Source: Bloomberg

...pulling Treasury yields and the dollar lower and sending gold higher as the market's expectations for The Fed dropped dovishly lower...



Source: Bloomberg

And bear in mind that, as Deutsche Bank strategist Steven Zeng said in a recent research note, net bill issuance of $400 billion is expected in June, followed by $500 billion between July and September. In total, Zeng estimated $1.3 trillion in net bill issuance by the end of the year... all of which could well drain significantly liquidity from the system.

But hey, keep selling vol (down 9 of the last 11 days) - VIX hit a 13 handle today, the lowest since Jan 2020...



Source: Bloomberg

Today saw a reversal of yesterday's chaos in equity land with Nasdaq surging at the cash open while Russell 2000 was dumped (but the latter made a strong comeback after Europe closed). S&P and Dow rallied around 0.5%...



Nasdaq was supported by the 0-DTE traders all day today who bought calls with both hands and feet...



Source: SpotGamma

Interestingly, the 'soft landing' reversal stalled today as Nasdaq outperformed Small Caps (but only modestly and even that reversed back lower in the afternoon...



Source: Bloomberg

TSLA rallied for the 10th consecutive day (it has only rallied for a longer period once before, in Jan 2021)...



Oh, and then there's CVNA...!



Treasuries were bid across the curve with the belly outperforming (5Y -9bps, 2Y -3bps, 30Y -6bps). The 30Y yield is back to unchanged on the week...



Source: Bloomberg

The dollar tumbled again today (its biggest daily drop since March) - the second big drop in a week - to 3-week lows...



Source: Bloomberg

Bitcoin went nowhere today...



Source: Bloomberg

Oil prices plunged today with WTI back below $70 and well below pre-Saudi-cut levels after headlines about possible Iran nuke deal talks... which was denied about an hour later...



Gold surged today, erasing yesterday's plunge as markets are all acting like penny stocks...



Finally, the "trilemma" continues to confuse...



The dollar, tech stocks and real rates are not supposed to act like this into a recession.

The dollar rallies (fact) on higher real rates (check) OR rising risk aversion (not present), tech rallies (fact) on lower real rates (not present) OR higher risk appetite due to US exceptionalism (check).

Goldman believes that the dollar is right and equities aren't.

 

Growth/Value Trend Reverses On Week; VIX Dumps, Bonds & Gold Jump As Jobs Slump
FRIDAY, JUN 09, 2023 - 04:01 PM

A week of reversals? The S&P 500 reversed into a new bull market (off the October lows) as jobless claims reversed to a 19-month high...



Source: Bloomberg

After a two-week rebound in macro-surprise data, US Macro data disappointed this week - most notably jobless claims...



Source: Bloomberg

But, the market's expectations for Fed rate changes shifted modestly hawkishly, holding on to post-payrolls shifts, with June expected be a 'pause' but July pricing in almost a full rate-hike. At the same time, rate-cut expectations by year-end have shrunk significantly as soft-landing (not crash landing) hopes reshape the distribution of outcomes...



Source: Bloomberg

On the week, Small Caps outperformed while Nasdaq lagged (another reversal) and The Dow and S&P struggled for gains...



The S&P 500 algos battled for a 4300 close...but lost...



The trend of Nasdaq outperforming Russell 2000 ended abruptly this week - after tagging its all time high from Feb 2000 peak of the dotcom bubble - but today saw some bouncing...



Source: Bloomberg

Following 7 straight weeks of growth outperforming value, this week saw a notable reversal with value outperforming growth by the most since the first week of January...



Source: Bloomberg

One thing that didn't change was the collapse in VIX, which hit a 13 handle - its lowest since Feb 2020 - this week. However, VVIX started to decouple from VIX's demise hinting at trouble ahead...



Source: Bloomberg

Regional bank shares rose for the 4th straight week, but stalled at resistance...



As far as the AI bubble, NVDA ended the week where exactly where it opened the morning after its blockbuster earnings... not exactly an exuberant follow through...



TSLA rose for the 11th straight day to its highest since Oct 2022...



...equaling its record winning streak...



Treasuries were very mixed this week with some big jumpy swings intraday. By the close, the long-bond outperformed (-1bps on the week) while the short-end was up around 9-10bps...



Source: Bloomberg

The yield curve (2s30s) inverted deeper this week as



Source: Bloomberg

The dollar fell for the second week in a row



Source: Bloomberg

Crypto was mostly lower this week as the SEC sued Binance and Coinbase prompting more FUD. Solana was hardest hit of the larger coins with BTC and ETH down around 3%...



Source: Bloomberg

Bitcoin clung to $26,500 after the Binance puke and bounce...



Source: Bloomberg

Gold rallied for the second week in a row, but had a very volatile dump and pump week...



Oil prices fell for the second straight week after the Saudi production cut news failed to impress (with WTI within a tick of a $68 handle at the week's lows having touched $75 at the highs)...



Finally, the "trilemma" continues to confuse...



Source: Bloomberg

The dollar, tech stocks and real rates are not supposed to act like this into a recession.

The dollar rallies (fact) on higher real rates (check) OR rising risk aversion (not present), tech rallies (fact) on lower real rates (not present) OR higher risk appetite due to US exceptionalism (check).

Goldman believes that the dollar is right and equities aren't.

Mega-Cap tech continues to ignore the tightening of financial conditions...



Source: Bloomberg

How long before The Fed worries they have blown another bubble with their pandering?

And don't forget, there is an alternative now...



Source: Bloomberg

Six-month T-Bill yields are 50bps higher than the S&P's current earnings yield - the widest spread since Jan 2021.

 

Bonds, Banks, Bullion, & Black Gold Dip As Mega-Cap Tech Continues To Rip
MONDAY, JUN 12, 2023 - 04:01 PM

Ahead of a potentially chaotic week with CPI, FOMC, and Quad-Witch OpEx, today was relatively 'quiet' on the headline-front.

Tesla's stock price rose for the 12th straight day - the longest winning streak in the company's history...



...now up over 100% YTD...



Source: Bloomberg

Apple broke out to a new all-time record high...



Source: Bloomberg

And that helped drag Nasdaq to outperform, as The Dow and Small Caps lagged. But all the majors ended green. NOTE the wild swings in Russell 2000 around the cash open...



As Nasdaq continued to reverse last week's losses relative to Small Caps...



Source: Bloomberg

With 4320 a key level - linked to the JPM Collar - it appears 0-DTE traders aggressively bought puts as the S&P neared that level, but failed to inspire any downside momentum... and in the end being forced to unwind (prompting 0-DTE call-buying)...



Source: SpotGamma

And today's winning lottery ticket goes to...



Citizens, KeyCorp, and Truist were all hammered today - weighing on the overall bank index - on margin (NIM) compression, rising charge-offs, and lowered revenue guidance respectively...



Last week's surge in value relative to growth has now been erased...



Source: Bloomberg

VIX rose back to a 14 handle today (despite the gains in stocks) reverting higher after VVIX's decoupling...



Source: Bloomberg

VIX1D soared today - just as it did ahead of last month's CPI...



Source: Bloomberg

Treasuries were mixed today with the short-end outperforming. The last hour saw buying across the curve though which left only 10Y and 30Y yields marginally higher...



Source: Bloomberg

The dollar ended higher after weakness overnight, with the green back bid thru the US session...



Source: Bloomberg

Crypto is down from Friday, after a total SNAFU liquidation on Saturday took the entire asset-class down in minutes...



Source: Bloomberg

Gold dropped again today, erasing last week's spike...



Oil prices tumbled today - not helped by Goldman slashing their year-end forecast - with WTI testing a $66 handle, its lowest close since March...



Finally, stocks continue to look through tightening financial conditions...



Source: Bloomberg

...hoping beyond all rationality for The Fed's next handout.

 

Dollar Dives As Yellen Questions Reserve Currency; Bonds & Bullion Battered After Mixed CPI
TUESDAY, JUN 13, 2023 - 04:00 PM

Something for every narrative in this morning's CPI:

• Headline CPI tumbled (yay, Fed is done forever!);
  
  
• Goods inflation rebounding (Fed can pause as Services prices slow);
  
  
• Core CPI warmer than expected and still sticky high (Fed can't stop, but maybe a skip!);
  
  
• SuperCore accelerating (Fed should keep hiking!).

Choose your own adventure. The STIRs market chose to kneejerk dovish, but as reality set in rate-hike expectations for September rose (June and July were lower but the latter still high). Moreover, the market has now fully priced out any rate-cuts this year (Dec now pricing in rate 6bps higher than current)...



Source: Bloomberg

The initial reaction in stocks was 'Buy Mortimer, Buy!", but as the cash equity market opened we saw the rotation from mega-cap tech to small-caps reassert itself...



By the close, Small Caps were the winner, up over 1%, while The Dow lagged and S&P and Nasdaq were just a smidge better - all the majors were green on the day...



AI stocks soared, but we note that comments by AMD's CEO that her new chips could mean 'fewer GPUs' are required for AI seemed to spook the entire sector...



Meme stocks soared...



Source: Bloomberg

TSLA rallied again today - the 13th straight day higher (a new record win streak) and up 41% in that time...



Notably, ORCL - which hit a fresh all-time record high at the open - spent the rest of the day being sold and ended red, despite strong earnings last night...



Treasuries were clubbed like a baby seal after an initial kneejerk lower on headline CPI.



Source: Bloomberg

2Y yields at highest since March and 5Y yields topped 4.00% for the first time since March 10th...



Source: Bloomberg

The yield curve (2s30s) kneejerked steeper on CPI then crumbled flatter all day to end at its most inverted of the day...



Source: Bloomberg

The dollar ended lower again - but well off its CPI-spike-lows - back at almost one-month lows



Source: Bloomberg

...as Treasury Secretary Yellen said she "expects a slow decline in the dollar as reserve currency."

YELLEN: Sanctions motivate others to look for tools outside the dollar

- France is not happy about sanctions but there is no meaningful work around to using the dollar

- Increase in the use of other reserve assets outside the dollar is to be expected pic.twitter.com/zzos0pwFYk

— Bitcoin News (@BitcoinNewsCom) June 13, 2023
Bitcoin spiked up to the pre-weekend-purge levels before fading back and ending the day unchanged...



Source: Bloomberg

Gold spiked modestly on the headline CPI and was then monkeyhammered back to the lows of its recent range...



Oil prices ended higher, rebounding off yesterday's lows/resistance...



Finally, just as we saw in the middle of the supply-chain chaos during COVID, firms are pre-buying, bringing forward demand dramatically - and stocks just want to extrapolate the trend...

Because all Chinese companies are rushing to get ahead of the AI chip blockade https://t.co/HyViOxpS48

— zerohedge (@zerohedge) June 13, 2023
Which leaves us "here"...



Source: Bloomberg

Can't be the same, right?

And what to expect tomorrow?

Check out this chart. The average intraday path the S&P has taken on the last six Powell Fed days has not been pretty.

Read more in our newest Fed Days report: https://t.co/OFWRCYKLzE pic.twitter.com/betBvy4YyQ

— Bespoke (@bespokeinvest) June 13, 2023

 

"Don't Call It A Skip" - Fed 'Pause' Prompts Wild Swings Across All Assets
WEDNESDAY, JUN 14, 2023 - 04:01 PM

A 'pause' in rate-hikes and a far more hawkish dot-plot than expected spooked markets and then Powell monotonously meandered through his press conference, seemingly providing something for doves to cling to (though we are not sure what).



Powell emphasized that the inflation fight is still a priority: "Without price stability, the economy doesn’t work for anyone."

"There's just not a lot of progress in core inflation."

"We want to see it moving down decisively."

But:

"Risks for inflation are still to the upside."

Powell says the process of getting inflation back to the 2% target “has a long way to go," but don't call this 'pause' a skip...

“The skip -- I shouldn’t call it a skip.”



And finally, to ensure the doves are clear:

“It will be appropriate to cut rates at such time as inflation is coming down really significantly. And we’re talking about a couple of years out.“

"I think, as anyone can see, not a single person on the committee wrote down a rate cut this year -- nor do I think it is at all likely to be appropriate if you think about it."

"Inflation has not really moved down. It has not reacted much to our existing rate hikes. We’re going to have to keep at it.”

The result of all that was a fair amount of chaos.

First things first, rate-change expectations rose (hawkishly) with all rate-cuts for 2023 now priced-out and the odds of a hike by September significantly higher...



Source: Bloomberg

Stocks were even more wild, dumping on the statement/SEP, rallying at the start of Powell's presser, only to reverse back as he noted 'no rate cuts forecast by anyone' and failed to actually offer a dovish bone to the market. The Nasdaq managed gains on the day while Small Caps and the Dow were hit hard (the latter hurt by UNH also) and late-day weakness dragged the S&P red but managed to pull back to unch at the close...



Nasdaq pushed ahead of Small Caps once again, reversing more of last week's reversal in favor of Small Caps...



With a big OpEx right ahead of us, optionsland is a little chaotic also but today's 0-DTE traders faded any gains off the PPI aggressively and were right...



Source: SpotGamma

VIX was smashed lower to a 13 handle!



Banks were dumped but investors rushed to the new safe-haven - AI stocks...



Utter chaos in bond-land with PPI taking yields gradually lower early on. The FOMC statement sent yields vertical - especially at the short-end - leaving the long-end actually lower on the day...



Source: Bloomberg

The yield curve (2s30s) plummeted to its most inverted since right around the SVB collapse...



Source: Bloomberg

The dollar ended lower - tumbling on the soft PPI, spiking on the FOMC statement, then fading back during the presser...



Source: Bloomberg

Gold ended unchanged but had a violent day, rallying on PPI, dumping on FOMC then bouncing then fading...



Oil ended lower on the day with WTI testing down near a $67 handle intraday, hit by Iran headlines, strong inventory builds and the hawkish Fed...



Perhaps most shockingly, crypto was the least volatile asset-class of the day...



Source: Bloomberg

Finally, did we just make the blow-off top on this AI cycle?



Source: Bloomberg

Maybe The Fed didn't like the decoupling from tighter financial conditions after all?



Source: Bloomberg

Now we need to hear the follow-up FedSpeak to set the narrative

 

Bonds, Stocks, & Bullion Bounce As Market Calls Powell's 'Hawkish' Bluff
THURSDAY, JUN 15, 2023 - 04:01 PM

Overnight ugliness in China data spurred yuan weakness (pushing CNH to its weakest vs the dollar since Nov '22), but the dollar's weakness today (post-ECB) smashed yuan higher (its biggest jump since March) despite all those hopes of stimmies...



Source: Bloomberg

The ECB's Christine Lagarde was not f**king around with nuance this morning as she hiked rates (as expected) and made it clear they will hike more - traders did not doubt her and the euro soared relative to the dollar (biggest EUR rally since early Feb)...



Source: Bloomberg

However, in US markets, traders pushed back against Powell's apparently hawkish bluster, sending rate-change expectations dovishly lower (though still above pre-FOMC levels)...



Source: Bloomberg

'Hot' retail sales numbers diverged from 'Cold' jobless claims data and ugly industrial production opposed a beautiful resurgence in Empire Fed's Manufacturing survey - so take your pick of what narrative (soft, no, hard landing).

As far as stocks are concerned - it's the 'never landing ever' route as everything roared higher with Nasdaq leading the way. Nasdaq was up 2% from pre-FOMC at its highs today and Small Caps ramped back into the green since FOMC...



Nasdaq has now reversed almost all of its underperformance relative to Small Caps from last week...



Another day, another short-squeeze...



Source: Bloomberg

Ahead of tomorrow's quad-witch, options-land was chaotic with 0-DTE traders pushing back hard against the opening ramp in stocks only to reverse it all, gamma-squeezing stocks to the day's highs...



Source: SpotGamma

Here's today's winning lottery ticket (with over 350,000 contracts traded)...



Source: Bloomberg

Do Not Panic!! NVDA closed red!



Treasuries were aggressively bid today with the belly outperforming, erasing all the post-FOMC move with the short-end underperforming overall for the last two days (though all yields are lower from Tuesday's close)...



Source: Bloomberg

The dollar - mirroring the surge in the euro - plunged by the most since early Feb today, back to 6-week lows...



Source: Bloomberg

Bitcoin bounced back modestly from last night's bloodbath (that dump occurred right around the cash equity close, not at the FOMC)...



Source: Bloomberg

Gold rallied (helped by the weak dollar), erasing yesterday's post-FOMC plunge...



Oil prices rallied today, reversing yesterday's losses with WTI back above $71...



Finally, was today's pump and dump in NVDA the top?



Source: Bloomberg

And, with quad-witching tomorrow, we thought this little chart from Nomura's Charlie McElligott was worth noting...



Point-being, McElligott explains, despite a local Vol suppressing outcome from the Fed yesterday, a “higher for longer” message only increases the attractiveness of “left tail” hard-landing trades in both -SOFR and -VIX Call Spreads in coming months.

Translation: this is as good as it gets - brace!

 

Stocks Dump As Massive Triple-Witch OpEx Punks Euphoric Markets
FRIDAY, JUN 16, 2023 - 04:09 PM

Heading into today's huge, $4.2 trillion triple-witching opex...



... stocks sprinted out of the gate, only to immediately run out of steam, hitting session highs at the cash open which is also the moment when $2.3 trillion in S&P options expired...

... and setting off on a long, boring grind lower, to close at session lows some 40 points lower...



... with all sectors sliding into the close...



... as the SPX 4,400 Call Wall - which the market steamrolled earlier this week in its euphoria sprint higher - exerted its magnetic influence lower on risk assets...



... just as we discussed last night...


Source: spotgamma
... and also as we observed after the latest Fed balance sheet release showed that reserves had started to slide again, even as risk assets continued their melt-up with oblivious abandon (but not for long).

Curiously, not even a constant push of delta buying by both 0DTE and regular option traders was able to reverse the slide in the index...



... nor the continued covering of the (formerly) record emini S&P future shorts, who were squeezed for a 2nd week in a row after the net short position hit a record at the end of May.



Curiously, as stocks fell so did the VIX, which tripped the moment the cash market opened, sliding lower with stocks...



... and extending the bizarro super-positive correlation between stocks and vol, which as Goldman said earlier has "rarely been this positive"...



... yet which also sows the seeds of the market's next puke, as Goldman's next chart showed (more on this correlation here).



To be sure, it wasn't just the greeks, and after they were kicked to the pavement in recent weeks, small caps (RTY) saw a clear rotation out of tech (QQQ) in the last hour, although as others have observed, if this is indeed the start of the "everything else" rotation, then we have a lot to go.



That said, don't cry for the S&P: despite today's drop, the index closed the week 2.6% higher, its biggest gain since the Fed stepped in with a massive "emergency" stimmy after the bank crisis in March, and the fifth consecutive weekly increase, the longest stretch since Nov 2021.



While stocks failed to catch a bid after the recent meltup, other more beaten down sectors finally pushed higher, with WTI pushing back over $70 after hitting a one-month lower earlier this week.



Likewise, gold and silver ramped higher after getting clubbed in recent days...



... and even bitcoin finally caught a bid one day after news hit that the world's largest asset manager, Blackrock, had filed for a spot bitcoin ETF, a move which sets up for an interesting confrontation between the most important man on Wall Street and the most useless Liz Warren henchman at the SEC, Gary Gensler.



Finally, while Treasuries did nothing notable today, the divergence between the two duration classes - 10Y paper and the QQQs - has extended its divergence to levels not seen in years.

 

Value Dramatically Outperforms Growth As Bonds & Bitcoin Slide
MONDAY, JUN 26, 2023 - 04:00 PM

A quiet start to the last week of the month/quarter with bonds and the dollar down a bit, gold up a smidge, and all the volume in a rotation from growth to value (for a change) in equity-land.



Source: Bloomberg

A weaker than expected Dallas Fed survey confirmed manufacturing is still f**ked in 'Murica as Independence Day looms, but on the day long-duration stocks (tech) significantly underperformed Small Caps (value-dominated). Late on, the entire market sold off (no obvious catalyst) with The Dow turning red along with the S&P and Nasdaq...



BTFD? As a reminder, the Nasdaq has not had a 'down July' since 2007...



Source: Bloomberg

Notably the Nasdaq/Russell ratio found resistance once again and reversed...



NVDA had an ugly day...



Treasuries were mixed on the day with the belly outperforming and the long-end lagging (30Y +1bps). NOTE that bonds were bid as Europe opened/Asia closed and then sold off on the US cash equity open - other than that, sideways...



Source: Bloomberg

The dollar opened weaker on Sunday night and has barely moved since...



Source: Bloomberg

Bitcoin slipped back from almost $31,500 to $30,000 (and found support) for a small close lower...



Source: Bloomberg

Oil managed gains on the day, but WTI was unable to break above $70...



Gold clung on to very modest gains after a pump and dump intraday...



Finally, Nomura's Charlie McElligott warns that despite many long-term investors anticipating an eventual return to a larger thematic “Secular Disinflation” world as driven by the long-term realities presented from the “3 D’s” (Demographics, Debt and Disruption—potentially supercharged now by AI) - many discretionary / tactical Macro investors are continuing to voice a conviction that it's unlikely to be a smooth glide path back to "the old world", and that we will continue to see overshoots in positioning and narratives as the "Frankenstein cycle" continues:

• Service inflation remaining “stuck”
  
  
• Worker wage renegotiations (higher) continuing around the globe
  
  
• Food / Ag Commodity inflation again reaccelerating in the US
  
  
• Broad “base effect” disinflationary tailwind again set to begin reversing course 3Q23 into 4Q23
  

But the market remains convinced The Fed will fold and start easing much more aggressively (i.e. weights a hard-landing/market-collapse with a higher probability than The Fed's Dots)...



Source: Bloomberg

Perhaps it will be the collapse of the AI-Boom (or put another way, the demand pull-forward extrapolation error)...



Source: Bloomberg

It's different this time though.

 

Stocks Soar As Strong Data Batters Bonds & Bullion, Sparks Hawkish Shift In Rate-Hike Odds
TUESDAY, JUN 27, 2023 - 04:00 PM

Strong housing data today is bad news for The Fed - and the market's 'pause-hopers' - as it threatens to re-ignite the Owners Equivalent Rent segment of CPI (which has rolled over and is helping with the recent trend of disinflation).

For context, the housing macro data is seeing the biggest serial upside surprises since 2003...



Source: Bloomberg

Consumer confidence also spiked, according to The Conference Board, and Durable Goods orders also surged in May. All-in-all, hot, damned hot, as overall macro surprise data is soaring...



Source: Bloomberg

And that all sent hawkish shivers through the STIRs market - with a 25bp hike in July now trading at 75% odds (and that terminal rate - around 5.35% - holding through year-end)...



Source: Bloomberg

But long-duration stocks didn't care. In fact from the moment the cash market opened, we were off to the races as the algos lifted everything (with Small Caps and Nasdaq leading the charge). The Dow lagged, weighed down by WBA's weakness. Some late-day selling, profit-taking wiped a little lipstick off the pig...



Options-traders (all expiration and 0-DTE) panic-bought calls all day...



Source: SpotGamma

Which ignited a huge short-squeeze. 'Most shorted' stocks surged over 4% from their lows...



Source: Bloomberg

VIX was lower again on the day and with stocks higher, the outlier correlation of VIX and S&P has begun to fade from 30 year highs...



Source: Bloomberg

From around 1130ET, the market barely saw any negative TICKs...



Source: Bloomberg

Before we leave equity-land, we note that while many have noted the concentration of equity market performance, we point out that the 'median' stock's performance is dramatically decoupled from the S&P 500 cap-weighted indices. We note that the last time these two indices decoupled to this scale was Q4 2021 (marking the peak in the S&P 500)...



Source: Bloomberg

Treasury yields were all higher on the day with the belly underperforming (3Y +8bps, 30Y +2bps). Yields are all higher on the week now...



Source: Bloomberg

The yield curve (3s30s) flattened (inverted deeper) almost back to pre-SVB lows...



Source: Bloomberg

Bonds (even Bills) continue to offer an alternative (6mo bill yields at their widest vs the S&P's earnings yield since Jan 2001)...



Source: Bloomberg

The dollar was lower on the day - despite the hawkish shift in rates - dumped during the early Asian market (Yuan strength) and then going nowhere...



Source: Bloomberg

Bitcoin surged overnight up to $31,000 but fell back - still closing higher though...



Source: Bloomberg

Oil prices tumbled ahead of tonight's API data, with WTI unable to hold $70, falling back to the recent range lows...



Gold continues to make lower highs and lower lows, back to 3-month lows...



Finally, to sum everything up...strong data (hawkish 'good is bad' signal), rate-hike odds up (hawkish response), stocks up (implied dovish signal, easing financial conditions), bond yields up (hawkish response to less recession risk, Fed reaction function), dollar down (implied dovish response to a hawkish shift?), commodities down (implied demand fears from hawkish response).

Longer-term things have 'decoupled;...



Source: Bloomberg

Confused yet? Are macro data surprises at "as good as it gets" levels?

 

Bonds & The Dollar Pop, Banks & Tech Drop As Powell Flexes Hawkishly
WEDNESDAY, JUN 28, 2023 - 04:02 PM

A quiet day for macro but all eyes were glued to The ECB's panel with the 'Big Four' Central Bankers.



The persistence of inflation was a major theme for Bailey, Lagarde and Powell, who all pointed to the strength of underlying prices so far, and how they are adapting policy to that.



Source: Bloomberg

Stocks were very choppy on the day with The Dow lagging and Small Caps leading. Nasdaq and S&P toyed with unch all day. We note there was an odd panic bid in futs right as the cash market closed and after likely thanks to Micron.



Banks were lower ahead of tonight's stress test results...



Tech was weighed down by some selling in chip stocks (AI) after NVDA was hit on headlines about increased crackdowns by Biden admin on chip exports to China. But the machines battled to keep NVDA above the critical $400 level...



0-DTE traders were actively supporting NVDA on the day...



Source: SpotGamma

It was another short-squeeze day with 'most shorted' stocks closing at their highs - up 6.5% from yesterdays' open...



Source: Bloomberg

A strong 7Y auction helped support bonds further but yields were lower across the curve by 4-6bps (belly outperformed). This dragged all yields lower on the week...



Source: Bloomberg

The dollar ramped higher today again to 3-week highs...



Source: Bloomberg

Bitcoin was pressured back below $30,000...



Source: Bloomberg

Another lower high and lower low today in gold...



Oil rebounded off the recent rang lows



Finally, Apple inches ever closer to the $3 trillion market cap level...



Source: Bloomberg

Will that be the top... again?



Source: Bloomberg

Is a new more aggressive crackdown on chip exports to China the end of this boom?

 

Rate-Hike Odds Spike After Strong GDP; Bonds & Big-Tech Battered
THURSDAY, JUN 29, 2023 - 04:00 PM

A big upward revision to Q1 GDP hid the extent of the weakness in pending home sales data and sent US macro surprise index back near recent cycle highs...



Source: Bloomberg

This sent rate-hike expectations spiking higher with around a 50% chance of two more rate-hikes holding into year-end...



Source: Bloomberg

And dragged Treasury yields higher across the curve (with the short-end underperforming - 2Y +17bps, 30Y +10bps) pushing them all notably higher on the week...



Source: Bloomberg

...smashing the yield curve (2s30s) back near pre-SVB lows - screaming recession and/or Fed policy error...



Source: Bloomberg

With 2Y Yields back up near cycle highs right before the SVB collapse...



Source: Bloomberg

The rise in yields this time smacked the long-duration tech stocks, and the ubiquitous rotation into value (banks helped by stress test results at the margin) occurred once again with Nasdaq the day's biggest loser and Small Caps biggest gainer. The Dow and S&P managed gains...



AAPL was unable to get up to $3 trillion market cap once again (finding resistance at $190.00 today)...



The divergence between yields and the Growth/Value rotation remains extreme...



Source: Bloomberg

Overdone? Is it time for Value/Small Caps to outperform Growth/Nasdaq?



The dollar hit near 4-week highs...



Source: Bloomberg

Bitcoin rallied today, extending its bounce of $30,000, helped by news that Fidelity is pitching a Spot Bitcoin ETF...



Source: Bloomberg

Oil prices managed modest gains, with WTI testing back above $70 - but unable to hold it...



Gold ended lower on the day but well off its spike lows (which tested down to near $1900 and bounced)...



Finally, we note that Nomura's Charlie McElligott asked yesterday (reflecting oin the equity market meltup) - So what would it take to blow this thing out?

His answer may well be worth paying attention to this morning...

Just spitballing...

Perhaps what is required (easier said than done!) is a proper “Correlation 1” event where the current dispersion wave reverses, especially if Grosses keep growing - potentially requiring some sort of AI crunch from the Long side (earnings expectations mania overshoots reality? - seems too early for that just yet)...

...or maybe from the Short-side, where US economic data does indeed see that aforementioned “animal spirits” trade and actually reaccelerates to such an extent that markets either begin adding-in fresh terminal rate…

...OR where heavily-short economically sensitives begin trading “early cycle” and get grabbed-into / painfully.squeezed.

No one was expecting that kind of 'animal spirits' growth? And The Fed can't stand for that.



But could The Fed handle that kind of reversal?