Daily Stock Market Recap per ZH

So, I was initially thinking of just adding these daily market recap posts from ZH into the weekly market discussion threads. But, upon further review, I think having these posted to their own dedicated thread might be more appropriate to reduce the spamming of theses posts, and encourage more daily discussions in the main weekly market direction threads.

 

'Bad News' Is No Longer 'Good News' As Jacked-Up Jobs Data & Jamie Dimon Jolt Markets

Banks, big-tech, and the buck tumbled today as gold, crypto, and bonds all surged higher after a weak manufacturing orders print was followed up by some ugly labor market indications from the JOLTS data.



In the "old days", this 'bad news' would have been 'good news' for stocks as the 'QE brrrrr' trade algos kicked in... but it seems the "r" word is a bigger problem for the marginal-buyer, and couple that with another inflationary impulse from oil and stagflation just got another check in the box.



Hope - the spread between 'soft' and 'hard' macro data - has collapsed to its lowest since 2002...



Source: Bloomberg

The STIRs markets did react how one would imagine, with a dramatic dovish flush...



Source: Bloomberg

With the entire short-end (Fed expectations) curve adjusting 15-20bps more dovish with a 25bps May hike now less likely than a coin-toss, and a 26% chance of rate-cut in June...



Source: Bloomberg

But stocks did not like it, as all but The Dow have erased all of yesterday's gains...



Notably, early in the day, 0DTE traders faded the S&P's losses, but once the index hit 4100, they covered those long delta flows pushing the market to its lows. The rest of the day saw the market track up and down with 0DTE flows...



Source: SpotGamma

'Most Shorted' stocks were slammed again at the open but could not make it back like yesterday...



Source: Bloomberg

This was all hampered further by Jamie Dimon's warning that "the current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come."

As if small banks didn't suffer enough before today with JPM sucking out their deposits, Jamie Dimon decided to land another crushing blow warning that the regional banks crisis (affecting non-JPM banks of course) will linger for years, sending the KRE sliding.

Well played

— zerohedge (@zerohedge) April 4, 2023
Regional banks tumbled back near the post-SVB lows...



All of yesterday's value-stock rotation was erased today...



Source: Bloomberg

Treasury yields tumbled today on the data with the short-end dramatically outperforming...



Source: Bloomberg

With 2Y Yields back below 4.00%...



Source: Bloomberg

And the re-steepening of the yield curve...



Source: Bloomberg

The dollar dived on the 'dovish' news to two-month lows...



Source: Bloomberg

Crypto rallied on the day with Ethereum outperforming, testing up towards $1900, the highest since Aug 2022...



Source: Bloomberg

Gold soared with Futs above $2040 and spot above $2020. Gold has only closed above today's close on 5 days in history..



Oil prices ended the day flat, with WTI holding above $80...



And finally, with oil prices rising, NatGas (on an oil barrel equivalent basis) is at its 'cheapest' to WTI since 2013...



Source: Bloomberg

And if you're wondering where oil goes next?



Source: Bloomberg

...chop for a few months before lifting off (and surprising an 'easy' Fed with resurgent inflation).

 

Banks & Big-Tech Breakdown On Bad Data, Fed Flip-Flop Sparks Dovish Dive In Rates
Well that all escalated quickly. Just a month ago, the world and his pet rabbit was crowing about soft-landings and strong labor markets (ignoring the constant reminders that the labor market is the 'last to go')... and now US macro data is serially surprising to the downside (with ISM Services and ADP today)...



Source: Bloomberg

And sure enough, the labor market (after today's ADP disappointment and yesterday's JOLTS print), is tumbling back to reality...



Source: Bloomberg

Additionally, The Fed's hawks are quickly turning dovish - Fed's Mester clearly got the tap on the shoulder overnight...

• Yesterday - MESTER: FED WILL NEED TO GET RATES UP 'A LITTLE BIT MORE', SEES FED-FUNDS RATE ABOVE 5%, HOLDING FOR SOME TIME
  
  
• Today - MESTER: TOO SOON TO SAY WHETHER FED WILL RAISE RATES IN MAY, HOPING WE DON'T TIGHTEN UNTIL SOMETHING BREAKS
  

And the market is not waiting for the rest of The Fed to come along for the ride.

As Nomura's Charlie McElligott noted, the market is betting very aggressively on lower rates by year end as year-end SOFR Skews are soaring (higher price, lower yield)...



Source: Bloomberg

The market is now pricing a terminal rate of around 4.90% in May (40% odds of 25bps hike and done), followed by 4 rate-cuts (back down to 4.00% by year-end)...



Source: Bloomberg

Year-end Fed rate expectations are now back below 4.00% - that is over 112bps below The Fed's DotPlot...



Source: Bloomberg

Finally, before we leave short-term interest-rate land, Powell's favorite market-based recession signal (the 18m fwd 3m spread to spot 3m yields) hit a new record low today (inverted by 165bps!)...



Source: Bloomberg

Recession called!

The Dow managed to hold on to gains today (thanks to MRK, JNJ, and UNH - so very defensive) while Small Caps (finance-heavy) and Nasdaq (mega-cap tech) both suffered together with the S&P back below 4,100...



0DTE traders were active today but just tracked the market, no lead or fade. However, while VIX ended the day modestly higher (from yesterday's puke into the close), it was sold down from above 20 intraday...



Source: Bloomberg

Cyclicals have notably lagged since the start of Q2...



Source: Bloomberg

Regional Bank stocks tumbled further today, making new post-SVB collapse lows, with the big banks sliding too (but above post-SVB lows)...



Source: Bloomberg

All eyes were on Western Alliance Bancorp which released data but failed to show its deposits (which spooked a few). Under pressure, around 1300ET, they released the data showing a small drop from $53.6bn at Dec 31 to $47.6bn at Mar 31st (an 11% decline).



Bonds were aggressively bid once again with the whole curve down around 3-4bps (even though the short-end of the curve was whippy today)...



Source: Bloomberg

The 2Y Yield fell to as low as 3.64% today before bouncing back toward 3.80%...



Source: Bloomberg

Interestingly, amid all the dovish adjustments, the dollar reversed yesterday's losses today, but remains lower on the week...



Source: Bloomberg

Crypto was choppy as liquidity remains very spartan. Bitcoin rallied up to $28,800 before diving to $27,800 and then bouncing back above $28,000 to end basically unchanged...



Source: Bloomberg

Oil prices were marginally lower today (despite the major draws) with WTI chopping around between $80 and $81 (holding all the post-OPEC+ gains...



Spot Gold topped $2030 today



Finally, we started this market wrap on data and we'll end of deposits, as Goldman's Chris Hussey noted earlier, after pushing 'pause' on the March banking crisis, regional banks are creeping back into focus this week with some banks losing another 5%-10% of their market cap amidst renewed scrutiny of deposit flows and just what the combination of higher funding costs and tighter lending standards may mean for profitability.

Today, it was WAL that spooked markets (and showed an 1% drop in its deposits in Q1), but Goldman expects deposit inflows into large banks, as both consumers and corporate treasurers have shifted deposits out of smaller banks and into large cap banks, money funds, and directly into UST. Large and regional bank deposit savings rates have not moved materially since the trough in 3Q21; however, CD rates are close to peak CD rates seen in 2Q19...



Clearly, any efforts at increasing deposit betas could create a moderate headwind for bank profitability, lending, and consequently GDP growth... and implicitly pressure the equity prices of the regional banks who would be hardest hit by the margin pressure.

Put another way, this banking crisis is far from over.

 

Bonds Best, Gold Good, Banks & Big-Tech Bad, & Jobs Ugly
Just over a week ago, the labor market surprises were carrying the enjoined hopes of every equity market bull and 'soft-landing'-believer on its lonely shoulders. By the end of this week, those hopes lay dashed to smithereens as wave after wave of reality checks sent the Labor Market data surprise index dumps back to 'soft' survey reality...



Source: Bloomberg

Most notably, today's BLS revisions to the jobless claims data is a 'game-changer' as the trend is now clearly 'bad' for the labor market and 'bad news is bad news' again as the 'recession' fears build (not helped by The IMF's downgrade of global; growth to its weakest in over 30 years).



Source: Bloomberg

And that had the impact one would expect in STIRs as terminal-rate expectations dropped (down at 4.95% in May now) and rate-cut expectations soared (more than 3 rate-cuts priced in for 2023)...



Source: Bloomberg

May remains a coin-flip for 25bps or pause, but overall expectations are well below the early week highs above 70%...



Source: Bloomberg

The Dow outperformed on the week with Small Caps the biggest losers and Big-Cap Tech also in the red, despite today's pre-payrolls meltup...



The Dow found support all week at its 100DMA...



Defensives dominated Cyclicals this week (defensives are actually up 4 weeks in a row)...



Source: Bloomberg

Energy and Healthcare outperformed on this short week while Industrials and Consumer Discretionary lagged...



Source: Bloomberg

Regional Banks traded down to new post-SVB lows (still dramatically underperforming the big banks and the market)...



Source: Bloomberg

Treasury yields were down across the board with the short-end outperforming...



Source: Bloomberg

The 5Y and 10Y yield dropped to their lowest close since September 2022...(and note just how far below FF the 2Y yield is trading)...



Source: Bloomberg

The yield curve (2s10s) steepened on the week (though we saw flattening today after the claims data)...



Source: Bloomberg

But Powell's favorite yield curve recession signal (3m18m fwd - 3m) massively flattened this week to record levels of inversion... screaming recession imminent.



Source: Bloomberg

US Mortgage rates tumbled for the 4th straight week (but with job losses building, we wouldn't get too excited about a homebuilder come back quite yet)...



Source: Bloomberg

Notably, the spread between the 30Y mortgage rate and the 10Y TSY yield has never been wider...



Source: Bloomberg

The dollar ended the short week lower...



Source: Bloomberg

Cryptos were mixed this week (since Friday's "close") with Bitcoin slightly lower, Ripple lagging, and Ethereum outperforming...



Source: Bloomberg

Bitcoin rallied up near $29k intraday during the week and Ethereum neared $1950 before fading back today (its highest since Aug 2022)...



Source: Bloomberg

A wild week in commodity-land with oil surging on OPEC+'s surprise production cut, precious metals outperforming (dovish data), and Nattie clubbed like a baby seal...



Source: Bloomberg

Gold surged this week to its second highest weekly close ever...



Oil largely traded sideways from Sunday's open with WTI basically swinging between around $80 and $81 all week...



Henry Hub NatGas plunged to a $1 handle once again today as forecasts showed unusually mild weather by mid-April, while traders parsed a government report that showed an inventory drop in line with analyst estimates.



Finally, ahead of tomorrow's "most important-est ever" payrolls print, we note that the STIRs market is completely ignoring any and all FedSpeak and DotPlots about "higher for longer" rates...



Source: Bloomberg

And in fact, as Bloomberg's Simon White notes, “higher for longer” rarely plays out like that in practice.

In fact, the median time between the last Fed hike and the first cut is only four months, while the average time is only six weeks.



In a sign of how quickly things can turn, it wasn’t long ago when the market was pricing in several more Fed rate hikes...



Source: Bloomberg

The market was pricing in 100bps of hikes by year-end after Powell's hawkish comments on March 8th, and swung to pricing in 105bps of cuts by year-end on March 24th.

And this week has seen those rate-cuts priced in more dovishly.

 

Bitcoin, Bond Yields, & The Buck Bid; Gold Skids

Bank lending is crashing (hurting small businesses and commercial real estate the most), the labor market is starting to snap (confirmed by payrolls on Friday), and inflation expectations are re-accelerating (NYFRB's survey today)... but apart from that, everything is awesome.



Source: Bloomberg

Since payrolls print on Friday, Treasury yields are up considerably, the dollar is surging, rate-hike odds are rising, bitcoin's up as gold falls, stocks are broadly unchanged with big-tech is underperforming small-caps.

BoJ's Ueda sparked the early weakness in stocks (and yen) after offering no signs of budging towards a more hawkish tone...



Source: Bloomberg

Small Caps are up solidly since payrolls, but Nasdaq, S&P and Dow are basically unchanged (with Nasdaq the laggard)...



Headlines hit around 1230ET about a drop in the amount of FHLB debt issuance (which has been an inverse proxy for bank pain). Stocks rallied on that (though ironically, regional banks were not very excited - since with both loans and deposits collapsing, banks don't need as many backstop-measures).



Here's Bloomberg's take: The Federal Home Loan Bank system issued $37 billion in debt in the last week of March, a sharp drop-off from the $304 billion two weeks earlier, according to a person familiar with the matter. That plunge from an all-time peak earlier in the month is an early sign that the banking crisis has started to subside.

It did help that the headline sparked a short-squeeze: 'Most Shorted' stocks were squeezed off an opening drop, rallied up to Wednesday's open and then faded back fast before the FHLB surge took it to the highs. That was a 3.5% surge from low to high today for 'most shorted' stocks, reminding us of JPMorgan's warning from last week...



Source: Bloomberg

...And 0DTE traders surged in with aggressive call-buying to help with the momentum...



Source: SpotGamma

Notably the early weakness took The Dow down to its 100DMA once again... and once again it found significant support...



Cyclicals outperformed Defensives on the day...



Source: Bloomberg

Treasury yields were all higher on the day (up 2-3bps from Friday's close but up significantly from overnight lows), extending Friday's yield surge with the short-end underperforming...



Source: Bloomberg

2Y Yields jumped back above 4.00%...



Source: Bloomberg

Fed Chair Powell's favorite yield-curve-based recession-signal continues to plumb new depths of inversion...



Source: Bloomberg

Rate-hike odds extended Friday's hawkish rise with a May 25bps now at 75%...



Source: Bloomberg

USDJPY surged above its 50- and 100-DMAs (yen weakest relative to the dollar in almost a month)...



Source: Bloomberg

Which, of course, sent the dollar index soaring



Source: Bloomberg

Cryptos rallied today, led by bitcoin, with some pointing to positive comments from Hong Kong authorities on web3 (ironic given the US' current crackdown on anything digital)...



Source: Bloomberg

That lifted Bitcoin back above $29,000 to its highest since June 2022...



Source: Bloomberg

Spot Gold prices fell back below $2000 (as the dollar spiked)...



Source: Bloomberg

Oil prices continued to tread water with WTI trading down to $80 but still in general holding the range since OPEC+'s surprise...



Finally, Bloomberg notes that speculators timed it just about perfectly before Friday’s strong US payrolls data, adding the most to their bets against benchmark Treasuries in just over a year. Net-short leveraged fund positions in 10-year futures climbed by almost 150,000 contracts in the week to last Tuesday, the biggest bearish shift since March 2022



Source: Bloomberg

“Although US yields bounced following the jobs report, they remain below levels from the prior week, leaving room for more upward repricing,” Goldman Sachs Group analysts including Praveen Korapaty wrote in a note.

“The mix of March data thus far should solidify the case for a hike at the upcoming May FOMC meeting.”

But today's moves basically stalled at Friday's highs.

 

Stocks Squeezed Before Late-Day ODTE Profit Taking As Bitcoin Storms To 10 Month Highs

It's only fitting that in a day when there was no fundamental news and when everyone is waiting for tomorrow's CPI print, with volumes near the lowest of the year, that the only thing that mattered today was positioning and technicals.

And as we wrote earlier, the most important technical factor was that hedge fund shorting of S&P futures had reached the highest level in 11 years...



... which coupled with growing pessimism about the market-leading tech generals (according to Goldman's PB desk)...



... and absent a bucketload of bad news, meant that stocks were primed for another slow motion meltup, which incidentally is precisely what we have seen with the Goldman most-shorted index rising sharply for a second day.



Add to this the still sizable CTA bid which we previewed at the start oft he month meant at least $29BN in forced S&P buying...

... and that's why for the third day in a row, futures erased another modest dip and traded to session highs



... before some early selling across the 0DTE complex starting at 230pm ET eventually pushed stocks lower...



... with almost all sectors solidly in the green...



... including the battered bank sector, as the KRE regional bank index rose for the 4th day...



... with the tech sector weakest on the day...



... the result of treasury yields rising for the 3rd day in a row following Friday's stronger than expected payrolls report...



... and even though the Fed's latest career Democrat, Chicago Fed president Austan Goolsbee, strongly hinted he would dissent with any more rate hikes next month, the market was skeptical and kept odds of a 25bps hike in May at just above 71%.



In short, just another quiet, rangebound day ahead of tomorrow's CPI print.

Elsewhere, the clash over where gold will go now that it has crossed above $2,000 continued, with the yellow metal trading on either side of this key line, as banks do everything they can do prevent a breakout to new record highs. Ironically, it's silver that has been the sleeper hit, rising pretty much every day for the past month.



But the biggest mover for the second day in a row, was not gold but rather digital gold, with bitcoin quietly extending on its YTD gains to 82%, and trading above $30,000 for the first time since last June much to the powerless rage of fake socialists (and Indians) like Elizabeth Warren.

 

Hawkish FedSpeak & Recession Fears Spoil The 'Cool' CPI Party

A busy-ish day for macro with cooler-than-expected inflation (but under the hood not so great), hawkish FedSpeak (more work to do, job's not done yet), and 'meh' FOMC Minutes (mild recession coming).

As a reminder, US macro data has been serially underwhelming since the last FOMC meeting...



1030ET Richmond Fed's Barkin said policymakers still have more work to do to tame prices after fresh data Wednesday showed inflation remained well above the Fed’s 2% target.

“I certainly think we are past peak on inflation, but we still have a ways to go,” Barkin said in a CNBC interview from Roanoke, Virginia, where the bank was hosting a conference. Barkin said he sees signs that demand is cooling, but said he was wary of declaring victory on inflation too soon, and noted that prices excluding food and energy were still too high.

“There’s still more to do I think to get core inflation back down to where we’d like it to be,” he said, but he stopped short of saying whether he would support a rate hike at the Fed’s May 2-3 policy meeting.

1200ET SF Fed's Daly was more hawkish:

“Looking ahead, there are good reasons to think that policy may have to tighten more to bring inflation down,” Daly said Wednesday in prepared remarks for an event at the Salt Lake Chamber in Utah.

1400ET The FOMC Minutes did not offer too much new insight aside from admitting that staff expect a mild recession this year - stocks initially ignored it, bonds and gold rallied modestly on the Minutes. Then stocks caught on to the recession headlines and tumbled, helped by hawkish comments from French central bank chief Villeroy:

“We may possibly still have a little way to go on rate hikes at our next meetings."

Villeroy cautioned that the growth in core prices – which excludes energy and food costs – “remains strong and is proving sticky.”

Nasdaq was the day's biggest loser while The Dow was the least ugly horse in the glue factory...



0DTE traders tried to ignite some upside momentum at the cash open after CPI's spike had faded. They also tried again on the FOMC Minutes (but that quickly reversed and dragged the market to its lows)....



Source:SpotGamma

After all that chaos, rate-hike odds for May were - drum roll please - unchanged at around 75% of a 25bps hike...



Source: Bloomberg

Treasuries were volatile and ended the day mixed with the long-end underperforming. Yields tumbled on the CPI print, jumped on the weak auction and the faded, accelerating on the recession warning from the Minutes. By the close 2Y Yields were down 5bps while the long-end was up 2bps...



Source: Bloomberg

An ugly 10Y auction took yields to the highs of the day, but the 'r word' in the FOMC Minutes dragged yields back down. The 2y yield ended back below 4.00%...



Source: Bloomberg

The dollar dived on the CPI print (dovish) and ignored the rest of the hawkish comments...



Source: Bloomberg

Bitcoin spiked up to within a tick of $30,500 on the CPI print then drifted back below $30,000...



Source: Bloomberg

Ethereum managed to get back above $1900...



Source: Bloomberg

Oil prices surged today (after CPI and inventory data), with WTI breaking out above $83 - its highest since Nov '22...



Source: Bloomberg

Gold was a little more chaotic today, with overnight gains fading into CPI... then spiking on CPI (before tumbling back)... and then re-rallying with futures back above $2030...



Finally, we note today's action in gold and oil reminded us that investors had - until recently - dusted off a classic recession play...



Source: Bloomberg

As Bloomberg's Ven Ram noted earlier, the ratio between gold and oil has surged to almost 24 from average levels of around 17 that have prevailed since the start of the millennium. Gains in bullion tend to far outstrip increases in oil prices during the onset of a recession. That’s because investors position themselves for the Federal Reserve to cut interest rates, after a long period of expansion when they would have been typically focused on the inflationary impulse stemming from higher energy prices.

But that recent reversal may suggest recession fears are easing a smidge (or is this a remnant of the 'paper' nature of the contracts used to construct the ratio - rather than the physical gold vs physical oil reality)?

Last month, the spread between high-yield dollar-denominated corporate bonds and those on investment-grade securities widened to levels that have been sufficient to trigger a recession in the past...



Source: Bloomberg

so...maybe The Fed's staff are right after all (but will it be mild?)

 

PPI Plunge Prompts Panic-Bid In Big-Tech, Bullion, & Bitcoin

A significantly softer than expected PPI print confirmed yesterday's headline CPI (just ignore the core), and with no FOMC minutes or FedSpeak to get in the way today, the algos ran with it lifting stocks to yesterday's highs, along wth gold and crypto as the dollar dived yet again.

Nasdaq led the surge today, as all of the US majors tagged yesterday's highs, but could not extend (ahead of tomorrow's retail sales print)...



Perhaps most notably in equity-land, VIX tumbled back to a 17 handle, testing its lows since Jan 2022. We also note that MOVE (bond VIX) is tumbling back from near-record highs...



Source: Bloomberg

Treasury yields were all higher on the day with the long-end underperforming (30Y +6bps, 2Y +1bps). Intraday, yields tested down to yesterday's lows before bouncing back. 2Y yields remain the only ones lower on the week (barely)..



Source: Bloomberg

The 2Y yield closed below 4.00% for the second day in a row...



Source: Bloomberg

Interestingly, after an initial drop, rate-hike odds are basically flat on the day from yesterday's close, but overall - from before the CPI data, the STIRs curve is dovishly lower by around 5-10bps...



Source: Bloomberg

The dollar continued its decline, falling back to its lowest since 2/2...



Source: Bloomberg

Bitcoin rallied back above $30,000



Source: Bloomberg

But it was Ethereum that outperformed, surging back above $2000 for the first time since Aug 2022 after its hard fork did not prompt as much staker selling pressure as feared...



Source: Bloomberg

The last few days have seen ETH dumped and pumped relative to BTC as the hard fork was executed...



Source: Bloomberg

Gold has only closed higher than this on 2 days in history (8/6/20 and 3/8/22)...



Source: Bloomberg

Oil prices slipped lower today, with WTI falling from almost $83.50 intraday to almost an $81 handle by the close...



Finally, bank stocks refuse to embrace the rebound in broad stocks ahead of bank earnings beginning tomorrow. Bloomberg notes, since the March 13 low in the wake of Silicon Valley Bank’s meltdown, the S&P 500 has gained ~7% and Nasdaq 100 ~10%. But the KBW Bank Index is little changed, the KBW Regional Banking index is down ~5% and the S&P 500 banks index has fallen more than 1%. Earlier this month the ratio between the S&P 500 Banks and SPX slid to the lowest ever in data going back over 30 years.



Source: Bloomberg

Bank earnings can easily disappoint a low bar as lenders struggle with vast shifts in deposits and plummeting deal-making. Nicholas Colas, co-founder of DataTrek Research, notes bank stocks are saying “there is something wrong with this critical part of the US financial system.” Bank earnings calls may be market-moving, he wrote in a note today. Being cheap probably won’t be enough to help bank stocks.

 

Hawkish FedSpeak & Stagflation Scares Spark Big Reversal In Markets

UMich inflation expectations re-surged, retail sales were a disaster, and manufacturing production plunged... but apart from that stagflationary set-up, everything is awesome (because headline industrial production rose more than expected, core retail sales was a smidge less terrible than expected, and headline UMich sentiment improved).

It was a hard week for both 'soft' data and 'real' data as they both showed serial disappointment (a positive for some assets in the case of inflation signals) but overall, 'hope' - the spread between hard and soft data - is at its lowest since March 2001...



Source: Bloomberg

Amid all that, traders shifted their short-term views on The Fed hawkishly, spurred on by the UMich inflation exp spike and The Fed's Waller who made it clear there was more 'pain' to come:

“Because financial conditions have not significantly tightened, the labor market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened further,”

He is not wrong...financial conditions are easing and that's not what The Fed wants...



Source: Bloomberg

The odds of a 25bs hike in May now up to 85% - almost back to pre-SVB levels...



Source: Bloomberg

US equities ended the week mixed with the Nasdaq basically unchanged and The Dow outperforming (these are changes from Friday's early futures close). The day was a bit chaotic as hawkish comments (and data) battled bonanza bank earnings (BA and UNH weighed the Dow down -177pts opposing GS and JPM's gains +90pts)...



The early ugliness in stocks today (QQQ below) was led by negative delta 0DTE traders' flow which turned at the key gamma strike level and dropped all the way down to the Hedge Wall before rebounding...



Source: SpotGamma

Additionally we note that S&P Net Spec positioning rose last week...



Source: Bloomberg

...from the 'most short' since 2011...



Source: Bloomberg

Banks dominated today's price action after earnings and along with energy stocks were the week's winners. Utes and real estate were the ugliest horses in the glue factory...



Source: Bloomberg

With JPM up over 7% today (and C soaring too)...



Source: Bloomberg

But as the big banks soared, the small banks pushed back to the post-SVB lows...



Source: Bloomberg

Another week with a big divergence between defensives (lower) and cyclicals (higher)... which is odd given the hawkish shift in rates...



Source: Bloomberg

Both Equity (VIX) and bond (MOVE) implied vol plunged this week with the former trading with a 17 handle - its lowest since Jan '22. Bond vol is still significantly elevated but has come down dramatically...



Source: Bloomberg

Treasury yields surged today dragging the entire curve higher on the week - in an oddly uniform manner (all maturities up 10-12bps)...



Source: Bloomberg

The 2Y yield spiked today back above 4.00% to its highest since the start of April...



Source: Bloomberg

The dollar rebounded off the February lows today, reversing much of the week's losses BUT still down for the 5th week in a row...



Source: Bloomberg

Crypto had a good week with Bitcoin holding above $30,000 (hitting $31k overnight)...



Source: Bloomberg

But Ethereum was the biggest winner, soaring above $2100 after the hard fork FUD failed to show up...



Source: Bloomberg

For context, ETH notably underperformed BTC into the fork then ripped back to one-month highs relative to BTC after...



Source: Bloomberg

Gold was having a great week, rallying up to near record highs before today's news sent the precious plummeting back below $2000. However, late in the day, spot gold rallied back above that Maginot Line...



Oil rallied for the 4th straight week with WTI closing above $82.50 - the highest weekly close since early Nov '22...



Finally, and most ominously, the sovereign credit risk of the USA soared to a record high this week...



Source: Bloomberg

But hey, it's probably nothing...

 

Shorts Steamrolled As Late Day Squeeze Sends Stocks To Session High, VIX Plummets

First, some context from Goldman's Prime Brokerage: "our franchise flows have shifted to local selling of tech this week and Nasdaq is only up in two of the past ten sessions (also note that it stands exactly where it stood in ... the spring of 2021)."



In other words, might as well have sold in May of 2021 and gone away for two years, enjoying all the hikes, golfing and trips and you'd still be right where you left off. Instead, you overtraded every market move and lost money.

Today was a micro snapshot of this entire dynamic: after some terrible results from large custody bank State Street, at a time when everyone is on edge about anything negative news out of banks, which sent State Street shares plunging by as much as 18%, the most intraday since March 2020...



... following the sharp early selloff, we say bank stocks gradually recover all losses before eventually trading near session highs by the close, as the massive hedge fund short overhang we discussed last week remains intact.



... and leads to a powerful rally every time a selling thrust is exhausted, and today was no difference. And speaking of massive short overhangs, after we noted last week that the number of non-commercial net specs (i.e. hedge funds) shorting the S&P is at an 11 year high, we have barely budged..



... which is also why stocks took the escalator down, and the short squeeze elevator up closing at session highs and squeezing another round of shorts in the process...



... which also is why the VIX was crushed today, as puts were unwound in a frenzy, and tumbled below 17 to the level where it was back in Jan 2022 when stocks were at all time highs!



And while banks promptly recovered and joined most other sectors in the green, the only sector that was lower was energy...



... tracking the renewed weakness in oil...



... where unlike stocks, shorts once again have zero fear of a squeeze, at least no a financial one - indeed, while all financial actors in energy are pressing their shorts having picked this asset class as the best expression of rising recession bets - bets which are encouraged by the senile occupant of the White House, because we learned today that another 1.6 million barrels in oil was drained from the Strategic Petroleum Reserve, it will be up to OPEC+ again to offset the relentless oily gloom.

Elsewhere, there was a still bitter aftertaste in the market's mouth from last Friday's hawkish Fed commentary and today's blow, near record beat in the NY Empire Fed, which pushed May rate hike odds to new cycle highs just shy of 90%...



... which helped push yields higher again and sending the 10Y back to 3.60% even if today that meant no selling in high duration tech names.



It did, however, mean that the dollar rose sharply after months of seemingly relentless declines which in turn helped smash both gold and cryptos with bitcoin dropping back under $30,000 after it was poised to rise above $31,000 just a few days earlier.



That said, with the next round of dollar-debasement just around the corner, the resumption of the fiat money alternatives rally is just a matter of time.

 

US Sovereign Risk Nears Record High; Yield Curve Screams Recession As VIXtermination Continues

Today was about the 'good' China data (GDP better than expected, helped by domestic demand), the 'bad' US data (building permits - implicitly forward-looking - much worse than expected), and the ugly (hawkish-ish Fed head Bostik - one more hike and hold for long time, no hint of cuts at all; and St. Louis Fed's Bullard reiterated his call for higher U.S. interest rates to combat inflation, saying he's not worried about a banking crisis and doesn't see a recession taking place anytime soon).

But the big one was the sound & fury beginning to build around the debt ceiling debacle with the T-Bill curve getting a bit wild...



Source: Bloomberg

And the US Sovereign credit risk spread hovering right at record highs...



Source: Bloomberg

Given all that VIX tumbled to a 16 handle making fresh lows since Jan '22...



Source: Bloomberg

The yield curve (2s10s) flattened dramatically...



Source: Bloomberg

And stocks pumped and dumped, Small Caps lagged on the day (but are still best from Friday. The Dow, S&P, and Nasdaq all closed unchanged-ish...



Nasdaq is lagging on the week while Small Caps lead...



Breadth remains irrelevant...



Source: Bloomberg

0DTE put and call traders battled against like yesterday, but unlike yesterday's late-day, today's covering left stocks unmoved...



Source: SpotGamma

Overall, US Treasuries were mixed today with the short-end underperforming (2Y +1.5bps, 30Y -2.5bps)



Source: Bloomberg

The odds of a 25bps hike in May held their post-SVB highs at around 88%...



Source: Bloomberg

The Dollar drifted lower



Source: Bloomberg

Bitcoin bounced back above $30,000 today after yesterday's selloff...



Source: Bloomberg

Gold managed small gains today, after dipping down towards $2000...



Having found support at $80, WTI bounced back to end the day unchanged ahead of tonight's API data...



Finally, the NY Fed recession probability model is flashing red...



...and it has never given a false signal at this level.

 

Regional Banks Rip Higher As Inflation Spooks Bonds, Bitcoin, & Bullion

Hotter-than-expected UK CPI spooked markets overnight but a lack of any really scary items in bank earnings (and NFLX big bounce back) offered BTFDers lots of opportunities today.

Small Caps outperformed (small financials heavy) as The Dow lagged (not getting green at all). Nasdaq and the S&P managed to squeeze back into the green. With about 15mins to go though, a major selling wave hit, dragging Nasdaq and S&P red and erasing most of the Small Caps gains...



TICK shows the sudden late-day wave of selling...



Source: Bloomberg

However, despite the bounce back in stocks, JPMorgan traders warned:

if the MegaCaps fail to change this quarter’s earnings profile, e.g., shifting expectations for EPS growth of -7% to perhaps flat/up, then we may be poised for a pullback in markets. Despite the moves over the last month, it is almost unanimous among client conversations that they remain bearish. What would change that view? A Fed pause/pivot and positive EPS growth are the two variables most commonly listed.

0DTE dominated the action once again. Early gains supported by a non-stop positive delta flow (dominated by call-buying not put-selling) but around 1140ET, put-buying started to accelerate (not call-selling) but stocks kept going higher (amid a classic short squeeze) which around 1345ET sparked a big cover in puts and sent the index to the highs of the day...



Source: SpotGamma

'Most Shorted' dumped at the open then ramped all the way back...



Source: Bloomberg

VIX plunged to fresh lows not seen since Nov 2021 (16.17 intraday lows)...



And VIX has slid lower as VIX calls have exploded higher relative to puts...



Source: Bloomberg

Regional banks shares surged to two-week highs despite reporting widespread declines in loan demand, ongoing credit tightening, and modestly rising mortgage delinquency rates.



But putting that in context, don't get too excited...



The Big-4 US Banks also rallied recently (after earnings) and as we note below - rather oddly - found support at the level of market cap of the Big-4 Chinese bank stocks...



Source: Bloomberg

Debt Ceiling drama continues to ripple through market chatter as the T-Bill curve starts to misbehave, with a dramatic kink about a month out as anxiety over taxes (lower = sooner X-Date) get priced in...



In fact, as Bloomberg's Cameron Crise noted this morning, that spread (which we track below using the generic 1m1m forward bill rate) isn’t completely accurate, because the dates of the May 16th (3.69%) and the June 13th (4.87%) bills don’t correspond precisely with those maturities.

But the sharp rise in the generic forward yield gives a pretty good indication of the kind of risk premium that’s been introduced into the bill curve - it’s the highest since January 2, 2001, when the Fed funds rate was 6.5%.



Source: Bloomberg

Short-end Treasuries underperformed again with 2Y yields up 7bps (and 30Y yields unch) today...



Source: Bloomberg

2Y yields have just extended higher after breaking above 4.00% on Friday, now back at their highest since just after the SVB blowout...



Source: Bloomberg

Which sent the yield curve (2s10s) reeling back down to post-SVB inversion lows (still well off the record lows)...



Source: Bloomberg

May rate-hike odds topped 90% (for a 25bp hike) - new post-SVB highs...



Source: Bloomberg

The dollar ended higher against its fiat friends but all the gains were during the Asia and European sessions (with USD selling during the US session).,,



Source: Bloomberg

Crypto was puked overnight after the UK inflation data (amid considerable long liquidations) with Bitcoin plunging down towards $29,000 (hammered as it broke $30k)...



Source: Bloomberg

But Ethereum underperformed (after ripping higher relative to bitcoin since the ETH hard fork)...



Source: Bloomberg

Gold ended the day lower, but well off its lows as Gold futures found support and bounced back above $2,000...



Oil prices also ended lower, with WTI breaking back below $80 overnight after the inflation print. A choppy session though amid mixed data from EIA on inventories...



Finally, the fecal matter is starting to strike the rotating object in the corporate bond market as the yield spread between IG bonds and Fed Funds has collapsed to near record lows...



Source: Bloomberg

This, according to TD Securities, "heightened the risk of a correction in the US investment-grade corporate bond market." And if IG bonds go, stocks won't be standing around twiddling their thumbs. Although we do note that the pain in IG will likely be enough to force The Fed's hand to pause or pivot sooner (but before you front-run it, The Fed won't get there without the pain).

 

Debt Ceiling Fears, Fugly Data, & FedSpeak Slam Stocks & Crypto; Gold & Bonds Bid

Some more ugly data today (Philly Fed slumped, claims jumped, home sales weak, leading indicators tumbled) sent the US Macro Surprise Index down to its lowest in over two months...



Source: Bloomberg

Debt ceiling anxieties are building (US Sovereign risk hits record high)...



Source: Bloomberg

And a scold of FedSpeakers today ahead of the blackout window did not help (most notably Mester):

• DOVISH-ISH - *FED'S GOOLSBEE: STILL FIGURING OUT CREDIT IMPACT OF BANK STRAIN
  
  
• NOTHINGBURGER - *FED'S WALLER SEES "CONSIDERABLE PROMISE" IN POTENTIAL USE OF BLOCKCHAIN TECH (no policy comments)
  
  
• HAWKISH - *FED'S MESTER: INFLATION STILL TOO HIGH, PROVING TO BE STUBBORN, NEED REAL RATES IN POSITIVE TERRITORY FOR SOME TIME
  
  
• HAWKISH - *FED’S MICHELLE BOWMAN: LOWERING INFLATION ESSENTIAL FOR ECONOMY
  
  
• HAWKISH - *DALLAS FED’S LORIE LOGAN SAYS INFLATION HAS BEEN MUCH TOO HIGH
  

And it was Mester that turned markets after Nasdaq had managed to get back into the green. The European open saw stocks get slammed lower only for the US open to get a boost from 0DTE traders lifting everything. But once Nasdaq had inched into the green, the buying ended and stocks plunged to fresh lows after Mester's hawkish call...



Worst day in almost a month for US Stocks.

TSLA suffered its worst day since Jan after margins compressed more than expected...



AT&T also painted an ugly picture of the consumer...



Regional Banks gave back some of yesterday's losses, but really its just floundering along at the post-SVB lows...



VIX hovered near 16 month lows, but VVIX has decoupled ahead of tomorrow's OpEx...



Treasury yields were lower across the whole curve (with the 2Y outperforming on the day) with 30Y Yields actually dipping lower on the week briefly (and 2Y yields underperforming on the week)



Source: Bloomberg

The evolution of the shortest end of the curve over the past few weeks shows the rapid increase in anxiety over an earlier-than-expected X-Date for the debt ceiling as tax receipts dry up...



The dollar inched lower today - stuck in its narrow range this week...



Source: Bloomberg

Bitcoin extended losses, tumbling back to $28,000...



Source: Bloomberg

Gold rallied on the day with Spot prices back above $2,000...



Oil prices dropped notably with WTI briefly touching a $76 handle intraday, quickly erasing all the post-OPEC gains as recession fears weigh on demand growth outlooks...



Finally, amid all the chaos surrounding the debt ceiling debacle, USA is now 'riskier' than AAPL...



Source: Bloomberg

Some currency translation muddies the verdict, but the trend is clear.

 

Stocks, Bonds, Gold, & Crypto Slide As US Sovereign Risk Roars To Record High

A glimpse at the short-end of the yield curve shines a bright light on market stress around the debt-ceiling X-Date being dragged closer. Bills that mature within a month are dramatically bid, while Bills that mature after a potential sooner-than-expected X-Date are bidless...



Source: Bloomberg

The yield curve itself shows that huge kink more clearly...



Source: Bloomberg

And that is reflected in the surge to record highs for short-dated USA sovereign protection costs...



Source: Bloomberg

But while USA risk is rising, US equity risk has been falling all week (to its lowest close since Nov '21)...



Source: Bloomberg

However, as VIX tumbled to cycle lows this week, VVIX is notably decoupling from it across today's OpEx...



Source: Bloomberg

Stocks suffered their worst week since March 10th (SVB collapse) with Nasdaq the biggest loser and Small Caps actually managing small gains...



Despite squeezes everyday this week, 'Most Shorted' stocks ended lower...



Source: Bloomberg

Energy stocks were the weakest this week while Staples and Real Estate outperformed...



Source: Bloomberg

As Defensives outperformed Cyclicals...



Source: Bloomberg

FSOC voted to tighten up regulation on the financial system (including non-banks) but while regional banks were up on the week, marginally, they are well off the week's highs...



...and remain just drooling along at the post-SVB lows in context...



Source: Bloomberg

Treasury yields ended the week higher (with the short-end underperforming) after today's post-PMI spike changed the week...



Source: Bloomberg

Fed Chair Powell's favorite yield-curve-based recession-signal (18m fwd 3m to spot 3m yield spread) hit its most inverted ever this week....



Source: Bloomberg

Rate-hike expectations continue to rise for next week (now 92% odds of a 25bps hike) but we also saw the entire STIRs curve shioft hawkishly (with June now at 25% odds of a 25bps hike) and the terminal rate back above 5.00%...



Source: Bloomberg

The dollar saw its first weekly gain since 3/10 (but remains only marginally off the February lows). NOTE that during the week though every impulse higher in the dollar was sold into...



Source: Bloomberg

Cryptos had an ugly week...



Source: Bloomberg

With Bitcoin surging back above $30,000 and then running out of steam fast, tumbling back to support at $28,000...



Source: Bloomberg

Spot Gold closed back below $2000 this week, having tried and failed to rally back above it a few times...



Source: Bloomberg

NatGas and Crude were lower on the week, along with copper, as growth fears were resurrected modestly. Silver ended the week unchanged...



Source: Bloomberg

And we note that WTI has erased most of the post-OPEC+ production-cut spike gains...



Source: Bloomberg

Finally, with one week left in the month of April, data back to 1985 shows that May is historically quite good for risk...



As Goldman notes, SPX is positive 76% of the time during the month of May with a median return of 122bps, and NDX is positive 66% of the time during the month of May with a median return of 325bps.

But only one thing matters...



So BTFD next week after Gamma unclenches as 42% of the market cap of the S&P 500 reports earnings?

 

Stocks, Bonds, Gold, & Crypto Slide As US Sovereign Risk Roars To Record High

A glimpse at the short-end of the yield curve shines a bright light on market stress around the debt-ceiling X-Date being dragged closer. Bills that mature within a month are dramatically bid, while Bills that mature after a potential sooner-than-expected X-Date are bidless...



Source: Bloomberg

The yield curve itself shows that huge kink more clearly...



Source: Bloomberg

And that is reflected in the surge to record highs for short-dated USA sovereign protection costs...



Source: Bloomberg

But while USA risk is rising, US equity risk has been falling all week (to its lowest close since Nov '21)...



Source: Bloomberg

However, as VIX tumbled to cycle lows this week, VVIX is notably decoupling from it across today's OpEx...



Source: Bloomberg

Stocks suffered their worst week since March 10th (SVB collapse) with Nasdaq the biggest loser and Small Caps actually managing small gains...



Despite squeezes everyday this week, 'Most Shorted' stocks ended lower...



Source: Bloomberg

Energy stocks were the weakest this week while Staples and Real Estate outperformed...



Source: Bloomberg

As Defensives outperformed Cyclicals...



Source: Bloomberg

FSOC voted to tighten up regulation on the financial system (including non-banks) but while regional banks were up on the week, marginally, they are well off the week's highs...



...and remain just drooling along at the post-SVB lows in context...



Source: Bloomberg

Treasury yields ended the week higher (with the short-end underperforming) after today's post-PMI spike changed the week...



Source: Bloomberg

Fed Chair Powell's favorite yield-curve-based recession-signal (18m fwd 3m to spot 3m yield spread) hit its most inverted ever this week....



Source: Bloomberg

Rate-hike expectations continue to rise for next week (now 92% odds of a 25bps hike) but we also saw the entire STIRs curve shioft hawkishly (with June now at 25% odds of a 25bps hike) and the terminal rate back above 5.00%...



Source: Bloomberg

The dollar saw its first weekly gain since 3/10 (but remains only marginally off the February lows). NOTE that during the week though every impulse higher in the dollar was sold into...



Source: Bloomberg

Cryptos had an ugly week...



Source: Bloomberg

With Bitcoin surging back above $30,000 and then running out of steam fast, tumbling back to support at $28,000...



Source: Bloomberg

Spot Gold closed back below $2000 this week, having tried and failed to rally back above it a few times...



Source: Bloomberg

NatGas and Crude were lower on the week, along with copper, as growth fears were resurrected modestly. Silver ended the week unchanged...



Source: Bloomberg

And we note that WTI has erased most of the post-OPEC+ production-cut spike gains...



Source: Bloomberg

Finally, with one week left in the month of April, data back to 1985 shows that May is historically quite good for risk...



As Goldman notes, SPX is positive 76% of the time during the month of May with a median return of 122bps, and NDX is positive 66% of the time during the month of May with a median return of 325bps.

But only one thing matters...



So BTFD next week after Gamma unclenches as 42% of the market cap of the S&P 500 reports earnings?

 

Bonds Bid, Stocks Skid As Debt-Ceiling Doubts Soar

The T-Bill curve is extremely dislocated following Friday's "worst case scenario" tax receipts data...



And the debt ceiling anguish is most clear in the short-dated cost of protection against a technical default by The US - which has soared today to its highest level ever (far above the Great Financial Crisis, debt downgrades, and prior debt ceiling crises)...



Source: Bloomberg

While equity markets remained largely ignorant of this threat again today (Nasdaq was down today but The Dow and S&P managed small gains)...



All eyes will be on FRC's earnings tonight after it rallied over 10% today (and is expected to swing +/- 23% after the earnings hit based on options pricing). Putting that 10% jump in context however...



The vol term structure shows the general level of anxiety ahead of rising with the data this week, FOMC next week, and then the imminent X-Date...



Source: Bloomberg

But we do note that with today's release of the 1-day VIX, that 0-DTE traders lifted vol while (normal) VIX drifted lower from its spike open...



Source: Bloomberg

Notably, the big short squeeze from mid-April (post-Payrolls) is rapidly running out of steam with 'most shorted' stocks down again today...



Source: Bloomberg

Treasury yields tumbled today, erasing all of Friday's spike, with the belly outerperforming...



Source: Bloomberg

Rate-hike expectations for next week rose to post-SVB highs (92% odds of +25bps)...



Source: Bloomberg

The dollar ended the day lower, back at last week's lows. Notably, the dollar was bid during the Asia session then dumped in Europe and US...



Source: Bloomberg

Bitcoin touched $28,000 overnight, only to fall back to touch $27,000 this morning, and found support there...



Source: Bloomberg

Gold managed gains on the day but spot prices remain below $2000...



Source: Bloomberg

Oil prices bounced today, with WTI back above $79, after almost erasing all the post-OPEC+ production cut gains...



Finally, circling back to where we started, while vol has been drifting generally lower - ignoring the earnings avalanche, the debt ceiling, and FOMC uncertainty - Bloomberg notes that the price to hedge, as measured by the spread between implied volatility for puts and calls, is spiking and has climbed above the latest peak in March during the worst of the banking crisis.



Source: Bloomberg

The move suggests traders are bracing for bigger moves to the downside ahead.

 

'Zombified' Banks, Soaring US Risk, & Liquidity-Suck Spark Plunge In Stocks & Bond Yields

Extreme positioning (bonds record short) meets macro weakness (sentiment and soft data crashing) meets liquidity suck (M2 collapsing) meets systemic threats (debt ceiling) meets idiosyncratic problems (FRC - banking system, and UPS - consumer) - quite a day!!


The world and his pet rabbit started the day off short Treasuries...



An ugly day for US macro didn't help (aside from new home sales which jumped on giant subsidies)...



Source: Bloomberg

And liquidity is collapsing more (M2 down over 4% YoY)...



Source: Bloomberg

FRC reported far worse than expected deposit outflows and yesterday's gains were eviscerated to take the stock down 50% back to record lows (and reignite banking crisis fears), accelerated to the downside by talk of asset sales (which if they can actually pull off would be a good thing)...



For some more context, FRC was trading $120 just six weeks ago... and is now below $8...



USA Sovereign risk soared once again to a new record as the X-Date looms closer amid dismal tax receipts...



Source: Bloomberg

Treasury yields tumbled today with the short-end dramatically outperforming (2Y -14bps, 30Y -6bps) extending the short-squeeze from last Tuesday...



Source: Bloomberg

2Y yields tumbled below 4.00%



Source: Bloomberg

The market has now priced out a full 25bps rate-hike this year...



Source: Bloomberg

The yield curve (3m10Y) flattened notably today (-12bps to -167bps)...



Source: Bloomberg

The Fed Funds curve has tumbled notably this week...



Source: Bloomberg

Small Caps were the ugliest horse in the glue factory today, followed by Nasdaq (-1.9%) and the S&P (down 1.6%). The Dow was the least bad of the majors, down 1% on the day...



This is the first close down more than 1% for the S&P in over a month

The S&P held at critical support, with the next stop down to its 50DMA at around 4033...



1-Day VIX exploded higher today, from an 8 handle to above 16, compressing its spread to VIX...



Source: Bloomberg

Turns out VVIX was right after all...



Source: Bloomberg

The dollar surged back to recent highs today (which looks like safe-haven bid as STIRs dived dovishly)...



Source: Bloomberg

Crypto was quiet for a change with Bitcoin very modestly higher, holding around $27,500...



Source: Bloomberg

Spot Gold rallied back above $2,000 twice today but was unable to hold it...



Source: Bloomberg

Oil prices clipped lower with WTI briefly back to a $76 handle...



Finally, worsening liquidity conditions and significant event risk coming ever closer is a decidedly negative set of circumstances. Yet despite this, there seems to be a general consensus that a) the debt ceiling will be avoided; and b) the uncertainty in the run up to X-Day is unlikely to have a notable market impact.

However, today's price action - especially in 0DTE, where there was a regime-shift from fading market trends to becoming an 'accelerant flow' - suggests fear is starting to mount that both a) and b) reflect too much complacency after all...



Source: SpotGamma

The debt ceiling - coming in the wake of banking stress and a slowing economy - may just be the proverbial straw that breaks the camel’s back.

Can MSFT and GOOGL change that sentiment back tonight?

 

Big-Tech & Bitcoin Jump, Bonds & Bank Stocks Dump As US Default Risk Soars

Another day, another ugly macro print (durable goods orders - ex Boeing - far weaker than hoped for, and shipments slumped); more banking system anxiety (not helped by FRC threats); and even more debt-ceiling anxiety as Dems make it clear no matter what Reps offer, they won't pass it.

FRC issued a blackmail threat to the other banks to 'rescue them or face the wrath of the markets when we explode' (our translation), but the market did not like and dumped the stock even more (down 35% today after yesterday's 50% collapse). The FDIC didn't help things by suggesting FRC's Fed borrowings capacity could be cut (clearly in a play for force a public bailout and make the big banks - that face billions of losses from uninsured deposits given to FRC - to pay up for FRC's loans)...



Source: Bloomberg

The KBW Bank Index tumbled back near post-SVB lows...



Source: Bloomberg

One stumbling block to a solution has been the conflicting needs of US officials and the banks that might help.

• The regulators favor a private rescue that doesn’t involve the US seizing the bank and taking a multibillion-dollar hit to the FDIC’s insurance fund.
  
  
• Banks want to avoid anything that damages their own finances and have been waiting for the government to offer aid, such as the FDIC taking control of the firm’s least desirable assets - something that can happen under the law only if First Republic fails and is put into receivership.
  

Not pretty but the T-Bill curve is breaking bad for a worst-case scenario X-Date...



Source: Bloomberg

And USA Sovereign risk has never been this high...



Source: Bloomberg

Nasdaq was the big winner today (thanks to MSFT and GOOGL) while Small Caps and The Dow led to the downside



VIX (normal, 1D, and 9D) all gapped down at the open - from yesterday's spike - but that vol-selling faded around 1200ET (as puts were bid, sending vol higher)...



...as 0DTE traders piled aggressively into puts (while call plays were entirely muted (once again confirming Nomura's Charlie McElligott's recent note that there has been a regime-change in 0DTE from intraday-hedging/fading trends to an "accelerant risk"...



Source: SpotGamma

Value stocks crashed relative to growth today after chopping sideways relative to each other for the last three weeks...



Source: Bloomberg

This was the biggest growth/value daily shift since Nov '22.

And ATVI was clubbed like a baby seal after UK regulators denied MSFT's bid (MSFT rallied on the day BUT it was not moved by the ATVI decision)...



Treasuries were mixed today with the short-end lower in yield and the long-end underperforming (2Y -3bps, 30Y +4bps). Yields remain significantly lower though on the week with the short-end outperforming (curve steepening)...



Source: Bloomberg

The 2Y Yield tested up to 4.00% today but couldn't hold it...



Source: Bloomberg

The Dollar ended the day lower but the session was a roller-coaster: down hard overnight then a sudden panic bid as US equity markets opened. The dollar index is higher on the week...



Source: Bloomberg

Crypto soared today, led by Bitcoin which touched $30,000...



Source: Bloomberg

Update: literally minutes after we prepped this chart, Bitcoin was clubbed like a baby seal...



Source: Bloomberg

Ethereum rallied but has been lagging Bitcoin in recent days...



Source: Bloomberg

Spot Gold ended lower on teh day after testing above $2,000 numerous times but unable to maintain it...



Source: Bloomberg

Oil prices fell once again, erasing all of the post-OPEC+ production-cut gains with WTI tumbling to $74...



Most notably, the WTI-Brent spread is now at its smallest (Brent compressing to WTI's lower price) since Nov 2020...



Source: Bloomberg

Finally, Bloomberg's Ven Ram notes that investors are erasing the distinction between the safest yields and speculative gains as conviction builds that the Federal Reserve will loosen monetary policy later this year.



Source: Bloomberg

The current earnings yield on the Nasdaq 100 basket is about 3.46%, equivalent to the yield available from 10-year Treasuries. That makes it the smallest equity premium since the early 2010s. A negative risk premium is typically tenable only if aggregate earnings are likely to see a techtonic shift higher or if interest rates are anticipated to slump a whole lot — say, more than 150 basis points within a short span of time.

 

Big-Tech & Bitcoin Jump, Bonds & Bank Stocks Dump As US Default Risk Soars

Another day, another ugly macro print (durable goods orders - ex Boeing - far weaker than hoped for, and shipments slumped); more banking system anxiety (not helped by FRC threats); and even more debt-ceiling anxiety as Dems make it clear no matter what Reps offer, they won't pass it.

FRC issued a blackmail threat to the other banks to 'rescue them or face the wrath of the markets when we explode' (our translation), but the market did not like and dumped the stock even more (down 35% today after yesterday's 50% collapse). The FDIC didn't help things by suggesting FRC's Fed borrowings capacity could be cut (clearly in a play for force a public bailout and make the big banks - that face billions of losses from uninsured deposits given to FRC - to pay up for FRC's loans)...



Source: Bloomberg

The KBW Bank Index tumbled back near post-SVB lows...



Source: Bloomberg

One stumbling block to a solution has been the conflicting needs of US officials and the banks that might help.

• The regulators favor a private rescue that doesn’t involve the US seizing the bank and taking a multibillion-dollar hit to the FDIC’s insurance fund.
  
  
• Banks want to avoid anything that damages their own finances and have been waiting for the government to offer aid, such as the FDIC taking control of the firm’s least desirable assets - something that can happen under the law only if First Republic fails and is put into receivership.
  

Not pretty but the T-Bill curve is breaking bad for a worst-case scenario X-Date...



Source: Bloomberg

And USA Sovereign risk has never been this high...



Source: Bloomberg

Nasdaq was the big winner today (thanks to MSFT and GOOGL) while Small Caps and The Dow led to the downside



VIX (normal, 1D, and 9D) all gapped down at the open - from yesterday's spike - but that vol-selling faded around 1200ET (as puts were bid, sending vol higher)...



...as 0DTE traders piled aggressively into puts (while call plays were entirely muted (once again confirming Nomura's Charlie McElligott's recent note that there has been a regime-change in 0DTE from intraday-hedging/fading trends to an "accelerant risk"...



Source: SpotGamma

Value stocks crashed relative to growth today after chopping sideways relative to each other for the last three weeks...



Source: Bloomberg

This was the biggest growth/value daily shift since Nov '22.

And ATVI was clubbed like a baby seal after UK regulators denied MSFT's bid (MSFT rallied on the day BUT it was not moved by the ATVI decision)...



Treasuries were mixed today with the short-end lower in yield and the long-end underperforming (2Y -3bps, 30Y +4bps). Yields remain significantly lower though on the week with the short-end outperforming (curve steepening)...



Source: Bloomberg

The 2Y Yield tested up to 4.00% today but couldn't hold it...



Source: Bloomberg

The Dollar ended the day lower but the session was a roller-coaster: down hard overnight then a sudden panic bid as US equity markets opened. The dollar index is higher on the week...



Source: Bloomberg

Crypto soared today, led by Bitcoin which touched $30,000...



Source: Bloomberg

Update: literally minutes after we prepped this chart, Bitcoin was clubbed like a baby seal...



Source: Bloomberg

Ethereum rallied but has been lagging Bitcoin in recent days...



Source: Bloomberg

Spot Gold ended lower on teh day after testing above $2,000 numerous times but unable to maintain it...



Source: Bloomberg

Oil prices fell once again, erasing all of the post-OPEC+ production-cut gains with WTI tumbling to $74...



Most notably, the WTI-Brent spread is now at its smallest (Brent compressing to WTI's lower price) since Nov 2020...



Source: Bloomberg

Finally, Bloomberg's Ven Ram notes that investors are erasing the distinction between the safest yields and speculative gains as conviction builds that the Federal Reserve will loosen monetary policy later this year.



Source: Bloomberg

The current earnings yield on the Nasdaq 100 basket is about 3.46%, equivalent to the yield available from 10-year Treasuries. That makes it the smallest equity premium since the early 2010s. A negative risk premium is typically tenable only if aggregate earnings are likely to see a techtonic shift higher or if interest rates are anticipated to slump a whole lot — say, more than 150 basis points within a short span of time.