Daily Stock Market Recap per ZH

Hedgies Hammered As Retail 'Dash-For-Trash' Accelerates; Oil & Gold Jump
TUESDAY, DEC 19, 2023 - 04:00 PM

"What hath Powell wrought?"

Decoupling from reality?

The Atlanta Fed GDPNOW forecast jumped up to 2.7% for Q4... does that seem like it fits with The Fed's dreams of rate-cuts galore priced in?



Source: Bloomberg

Dramatically easier financial conditions and lower mortgage rates supported a manic (surprise) surge in Housing Starts, which was the main macro data of the day... which lifted homebuilder stocks higher again. Are we about to see a massive 'catch-up' from the dismal housing data?



Source: Bloomberg

But The Fed has pivoted and the Dash-for-Trash continues as 12Mo Laggards soaring as financial conditions ease...



Source: Bloomberg

Early last week, we highlight that retail investors were the only buyers left, and while some questioned whether that would be enough to support stocks, MS Quant desk notes today, it is retail investors that have arguably been a big driver of the melt up given they have been buying at the fastest pace in over 18 months, coming in with over $60bn in total equity market demand over the last month on QDS estimates based on public data.

Retail is typically a buyer of ETFs, but the last month hit a record in dollar terms, likely helping the market rally.



Even more remarkably, SPY - the largest and most liquid S&P 500 ETF - has seen 4 straight days of massive inflows since Powell pivoted with Friday 15th seeing the all-time biggest inflow into the fund of almost $21BN (and over $40BN in the last four days)...



Source: Bloomberg

As Bloomberg's Eric Balchunas notes, the $21BN SPY inflow is an all-time world record for any ETF in one day flow.

In single-names the story is a little different though, and retail is likely less of a driver of price action compared to HFs – while retail has turned a single-stock buyer after 18 months of selling, retail volumes as a share of total are down slightly (although not historically low)...



... and that demand has never been more concentrated in a handful of Tech and Consumer names, and in aggregate only totals $15bn over the last month...



Looking forward, retail demand may slow into year-end before picking up again in January given seasonals – and while MS QDS is skeptical the pace of demand continues then given the narrow breadth, the potential is there for plenty of more buying given only a small piece of the selling from April 2022 through October this year has been reversed.

All the majors kept going higher today with Small Caps dramatically outperforming. Nasdaq was actually the laggard on the day...



The Dow is up 9 days in a row (it was up 12 in a row in July 2023). closing at a new record close.

'Most Shorted' stocks screamed higher today in another massive squeeze. 'Most Shorted' stocks are up a stunning 16% since The Fed last week (and MAG7 stocks up around 2%)...



Source: Bloomberg

Which broadly speaking, means L/S hedge funds ugly December, just got even uglier...



Source: Bloomberg

For context, this is the worst month for L/S hedge funds since Jan 2021 (and second worst month in at least 12 years)...



Source: Bloomberg

Before we move on from the chaos in stocks, it is worth noting that there is a small canary in the coalmine starting to croak. VVIX (vol of vol) remains significantly elevated relative to VIX - someone is hedging for a sudden VIXplosion?



Source: Bloomberg

Maybe because market gamma is starting to decline from record highs, unclenching its range-bound hold on markets...



Source: Goldman Sachs

Turning to bonds, they were very quiet today compared to stocks, with yields barely changed at all (perhaps a smidge lower). Since The Fed, all rates are basically down 27-30bps...



Source: Bloomberg

The 30Y Yield continues to try and test down to 4.00%... but not `quite make it...



Source: Bloomberg

Bitcoin extended yesterday's gains up to $43,500 overnight before sliding back to find support at $42,000...



Source: Bloomberg

The BoJ's utter failure overnight sparked JPY weakness, but EUR and GBP strength offset that and pushed the Dollar lower...



Source: Bloomberg

Oil bounced again today amid growing tanker tensions in the MidEast



Gold ripped back above Friday's plunge levels...



Finally, we note that equity markets generally perform better as interest rates fall...



...as long as a recession is avoided.

 

'Margin Calls?' - Stocks & Bond Yields Puke As Goldilocks Dies
WEDNESDAY, DEC 20, 2023 - 04:00 PM

Existing home sales beat (bouncing modestly off record lows), consumer confidence jumped (as inflation expectations declined and labor market conditions worsened), but earnings reports from FedEx and General Mills threw some cold water on the 'resilient' consumer, cyclical rebound narrative.

And it's the commentary from Corporate America that has us wondering:

Did the Goldilocks narrative just die?

• 30Y yields broke below 4.00% - the first close below 4.00% since July
  
  
• March rate-cut odds soared
  
  
• Rate-cut expectations for next year surged
  
  
• Stocks puked
  
  
• Bond yields plunged

That smells a lot like a 'recession' trade to us as it's not the Fed's post-Powell jawboning to walk-back the market's dovishness (because rates shifted dovishly).

Fed's Harker was a little more dovish than the recent walkback-of-Powell's comments by various Fed speakers, but still pushed off any imminent rate-cuts:

“It’s important that we start to move rates down,” Harker said Wednesday in a local radio interview.

“We don’t have to do it too fast, and we’re not going to do it right away.”

Rate-cut expectations for March surged to new cycle highs this morning...



Source: Bloomberg

And expectations for rate-cuts next year re-accelerated dovishly, shrugging off all the FedSpeak of the last week, trying to walk-back what Powell did...



Source: Bloomberg

The Dow ended its streak of losses at 9 days, as the S&P suffered its biggest decline since October...



Starting around 1430ET - margin-call time...



...the biggest sell-program since July smashed stocks lower...(and that was followed quickly by a large buy program)...



Source: Bloomberg

For context, this size of selling pressure is unusual...



Source: Bloomberg

Did the L/S funds finally get tapped on the shoulder...

Or was this why we puked?

'Most Shorted' stocks were clubbed like a baby seal, with the biggest daily drop since February...



Source: Bloomberg

MAG7 stocks puked...



Source: Bloomberg

As 0-DTE traders dumped calls aggressively in MAG7 stocks...



Source: SpotGamma

But there was a major 0-DTE S&P Put buyer that seemed that prompted the overall market to drop into negative gamma and sent the S&P spiralling below its Put Wall...



Source: SpotGamma

It turns out VVIX was right to be worried...



Source: Bloomberg

Treasuries were aggressively bid across the curve with the short-end outperforming today (30Y -6bps, 2Y -9bps). Since the FOMC, yields are down 33-38bps...



Source: Bloomberg

Despite the ugly 20Y auction, 30Y Yields tumbled back to test 4.00%...



Source: Bloomberg

The dollar rebounded, erasing most of yesterday's losses...



Source: Bloomberg

Bitcoin rallied back above $44,000...



Source: Bloomberg

But Ethereum continues to underperform...



Source: Bloomberg

Gold drifted lower...



Oil prices ended lower after WTI topped $75 intraday...



Finally, bear in mind that VIX was not buying the last big squeeze higher in stocks...



Source: Bloomberg

Reality check time?

 

Bitcoin, Bullion, & Big-Tech Bounce As Rate-Cut Hopes Roar Higher
THURSDAY, DEC 21, 2023 - 04:00 PM

Personal Consumption growth slowed (3 months ago) and so did Core PCE inflation (to 2%); Jobless claims fell (to 2023 lows) as the LEI continued to tumble, signaling recession in 1H24.

So, 'goldilocks', 'soft landing', 'everything is awesome', or 'we are all going to hell' - pick your own narrative... as economic data remains sluggish and financial conditions dramatically 'loose'...



Source: Bloomberg

All of which prompted a dovish response in STIRs, with the odds of a March rate-cut higher still, now at 80%)...



Source: Bloomberg

And expectations for the number of rate-cuts next year higher (now around 160bps)...



Source: Bloomberg

Echoing yesterday's malarkey, 0-DTE traders pushed the markets around to the downside with an initial downswing around 1130ET and then again from around 1330ET. And then as the market refused to fold in the afternoon (like it did yesterday)...

...0-DTE call-buyers swamped it and sparked a surge higher in the main indices...



Source: SpotGamma

VIX spiked intraday back above 14.5, but then in the afternoon, vol-sellers re-appeared



Small Caps were the best performer, up 1.5% on the day and The Dow was the laggard, though all the majors were green. However, as the chart shows, today's recovery was considerably less of a gain than the losses yesterday afternoon - still down around 0.5% from the 1430ET raid plunge yesterday...



MAG7 stocks opened higher, traded down into the red briefly then recovered...



Source: Bloomberg

Treasury yields were higher across the curve but not significantly relative to recent chaos, with the long-end slightly lagging (30Y +4bps, 2Y +1.5bps)...



Source: Bloomberg

With the yield curve (2s30s) steepening



Source: Bloomberg

The Dollar dived, falling back below the post-Powell lows, back to its weakest since early August...



Source: Bloomberg

Bitcoin rallied back up to $44,000 once again and faded...



Source: Bloomberg

Gold jumped back up to recent highs...



Source: Bloomberg

Oil prices ended slightly lower, but well off their lows, with WTI just below $74...



Source: Bloomberg

Finally, the market seems very sure that this is not about to happen...



Source: Bloomberg

Do you feel lucky?

 

Crypto, Crude, & Crap Stocks Rally As Yield Curve Steepens, Rate-Cut Hopes Soar
FRIDAY, DEC 22, 2023 - 04:00 PM

A weird week of macro data - strong jobless claims but weak labor market data from UMich; housing starts soared but new home sales crashed; rapidly slowing inflation all driven by goods deflation (as crude prices begin rising again). So macro surprises have flatlined for a week or two - even as financial conditions continue to loosen dramatically...



Source: Bloomberg

As Goldman's Chris Hussey notes, "This week we got further data suggesting that we have not only landed softly, but that the principal concern of a successfully soft landing economy -- that growth takes off again, triggering renewed inflation, and prolonging the Fed hiking cycle -- is likely behind us."

Small Caps soared almost 3% this week (its 6th straight week higher), now up 25% from the lows on Oct 27th. The Dow lagged on the week, but still managed gains while Nasdaq and S&P rallied for the 8th week in a row (the longest streak since 2017)...



Today was 0-DTE selling pressure again, like Wednesday (but on a smaller scale) and Thursday (which worked briefly but then was face-ripped).

The black line is the S&P 500. The red line is 0-DTE options delta flow...



Source: SpotGamma

Wednesday, it worked...



Source: SpotGamma

Thursday, it almost worked...



Source: SpotGamma

'Crap' stocks - ok, profit-less tech - surged this week, but not before Wednesday's 0-DTE-inspired crash wrecked some dreams...



Source: Bloomberg

...and no this is not the same chart, 'most shorted' stocks also followed the same pattern with a big squeeze at the cash open every day this week...



Source: Bloomberg

...and the biggest losers have become the biggest winners as financial conditions have eased...



Source: Bloomberg

The Bullish consensus is getting serious...



Source: Bloomberg

Are investors really excited about The Fed being forced to massively slash rates?

Rate-cut expectations surged to a new high this week, now pricing in 163bps of cuts in 2024...



Source: Bloomberg

If The Fed needs to cut rates that far, that fast, it won't be because of slowing inflation - it will be because of accelerating depression... which ain't good for stonks.

Nevertheless, the market is now pricing a 90% chance of The Fed starting to cut rates in March...



Source: Bloomberg

So much for the FedSpeak trying to jawbone the market back from its extreme reaction to Powell.

They better hope that cyclical inflation doesn't 'cycle' back higher (cough Red Sea cough)... and/or that acyclical inflation falls fast...



Source: Bloomberg

Treasuries were mixed this week with the short-end the best performer by far but the long bond was the only segment of the curve to end higher on the week...



Source: Bloomberg

Which bull-steepened the curve quite notably on the week...



Source: Bloomberg

The dollar fell to its weakest since July, down for the 5th week in the last 6...



Source: Bloomberg

Ethereum soared today relative to bitcoin, but only enough to bring it back to unchanged (relative to bitcoin) on the week...



Source: Bloomberg

On the week, both ETH and BTC were up around 4% (while Solana soared 35%), with BTC holding around $44,000...



Source: Bloomberg

Gold is up 4 of the last 5 days, rising for the 5th week of the last 6 and back above $2050 spot to three-week highs...



Source: Bloomberg

Oil prices rose for the second week in a row, after seven straight weeks lower. The 3% jump in WTI was the best week since mid-October (finding resistance at $75)...



Source: Bloomberg

Finally, from a valuation perspective, things are getting a little pricey. It now takes the average American 1279 hours of work to earn enough to buy The Dow...



Source: Bloomberg

That's quite a jump from the 225-hour average from 1965 to 1995 before Greenspan unleashed the activist Fed.

 

'Biggest Losers', Bullion, & Black Gold All Bid On Boxing Day
TUESDAY, DEC 26, 2023 - 04:00 PM

The S&P 500 is now up over 15% since October 27th. And the Santa rally markets have been experiencing since just before Thanksgiving continues even after he dropped his presents around the world on Monday and faces the Boxing Day hangover.



As Goldman's Chris Hussey notes, a combination of...

• strong consumer spending in stores (12/14 - Retail sales accelerate in November on sequential basis),
  
  
• a rapid deceleration of inflation (12/22 - Core PCE Inflation falls further), and
  
  
• a dovish tilt from the Fed (12/13 FOMC dots and the market shrugging off the post-FOMC jawboning)

...have all contributed to an extremely market-friendly backdrop for stocks - especially when you consider that US growth remains resilient as captured by the strong November labor reports.

Today's economic data only added to the favorable narrative. The S&P Case-Shiller home price index increased in line with consensus expectations in October. The Chicago Fed National Activity Index jumped back above trend, the Philly Fed Services survey soared back into expansion, and the Dallas Fed manufacturing index for December came in higher than expected.



Source: Bloomberg

Small Caps continued to explode higher today, significantly outperforming the rest of the US majors today (which all managed solid 0.5%-ish gains) amid a low liquidity holiday week. Some late-day selling spoiled the party though...



'Most Shorted' stocks surged back up to erase last Wednesday's 0-DTE-driven pukefest...



Source: Bloomberg

The previous biggest losers continue to dominate the gains as financial conditions have eased dramatically...



Source: Bloomberg

And the dash for trash continues...



Source: Bloomberg

VIX was smashed lower to within a tick of a 12 handle...



Treasuries were unchanged on the day but not after selling pressure overnight which was erased after a strong 2Y auction...



Source: Bloomberg

The 2Y yield was the biggest swinger...



Source: Bloomberg

The dollar dipped back to Friday's lows amid very low liquidity in FX land...



Source: Bloomberg

Bitcoin was clubbed like a baby seal, once again seeming stalling out around $44k...



Source: Bloomberg

Spot gold prices rallied back above $2060...



Source: Bloomberg

Oil prices surged today with WTI back above $76 for the first time since Dec 1st...



Which appears to have put a local low in the price of wholesale and retail gasoline...



Source: Bloomberg

Finally, this is odd...



Source: Bloomberg

Americans are spending more despite being considerably less confident.

 

Massive 'Safe-Haven' Panic Bid In Bonds, Gold, & Swissy Sparks Dollar Exodus
WEDNESDAY, DEC 27, 2023 - 04:00 PM

Somebody knows something...

Dollar pukefest, Swiss Franc panic-bid, bond yields plunge-gasm, gold surge-plosion, Crypto spike-a-thon... and stocks UNCH.



Looking at stocks today you could be forgiven for thinking that today was a typical 'meh' mid-week between Xmas and NYE day with all the US majors hovering around unchanged (until the last second idiocy from algos)...



BUT, It was far from it in every other asset class as the dollar dumped while gold, bonds, swiss franc, and crypto all ripped higher as Magnificent 7 stocks were liquidated shortly after 10amET.



Source: Bloomberg

Notably, 0-DTE call-covering was very heavy as the Magnificent 7 was sold around 10am (after 0-DTE call-buying dominated at the open)...



Source: SpotGamma

The Swiss Franc soared today by over 1% against the USD - the second biggest 'ultimate safe-haven' gain of the year outside of FOMC/ECB days...



Source: Bloomberg

That lifted Swissy to its strongest since the SNB intervention in Jan 2015. 2023 has seen the Swiss Franc's strongest annual gains against the dollar since 2010...



Source: Bloomberg

2Y yields crashed today, gapping down by 8bps this morning as a wave of safe-haven buying hit multiple asset-classes.



Source: Bloomberg

But the entire curve was lower in yield on the day (down 10-11bps) thanks to a strong 5Y auction also...



Source: Bloomberg

The bond rally today snapped the 30Y yield down to unchanged for 2023 (the rest of the curve is all lower in yield for 2023 already)...



Source: Bloomberg

Put another way, Fed Funds are up 100bps on the year and the rest of the curve is flat or lower in yield...



Source: Bloomberg

The S&P 500 surged on the strong 5Y auction (as yields declined) but reversed all that back to unchanged. The market then exploded higher in the last 2 minutes of the day on the back an almost $3BN MoC sell imbalance...



The dollar plunged at around 7am after drifting lower all night...



Source: Bloomberg

That smashed the greenback to its lowest since July...



Source: Bloomberg

Dollar's loss was Gold's gain as the precious metal jumped to



Source: Bloomberg

And closed at a new record closing high...



Source: Bloomberg

Elsewhere it was a big day in crypto with Ethereum dramatically outperforming (as Solana faded)...



Source: Bloomberg

Today saw $29 million in ETH short liquidations - the most since early December...



Source: Coinglass.com

That pushed ETH/BTC up to recent key resistance, where it stalled again (for now)...



Source: Bloomberg

...as Bitcoin extended its roundtrip rebound back up to $43,500...



Source: Bloomberg

Despite the dollar weakness, oil prices fell today, erasing most of yesterday's spike gains ahead of tonight's API inventory data...



Source: Bloomberg

Finally, in case you wondered, only one thing matters still - global liquidity. As macro funny-mentals have deteriorated, stocks have soared in line with global liquidity....



Source: Bloomberg

And, while the last two months have seen real yields declining as P/Es rise, they remain dramatically decoupled from their prior regime...



Source: Bloomberg

This level of S&P 500 forward valuation implies a negative real-yield... is it any wonder that gold and crypto are rallying too?

 

Crude, Crypto, & Credit Crumble As S&P Nears Record High
THURSDAY, DEC 28, 2023 - 04:00 PM

The penultimate trading day of the year was 'mixed' with Small Cap stocks and Treasury Bonds down; The dollar and The Dow up; and crypto, credit, and crude all falling as what little macro data there was disappointed (wholesale inventories declined for the 9th month in a row; claims rising more than expected and pending home sales weaker than expected).

March rate-cut odds remain around 85-90% with around 160bps of rate-cuts priced-in still for 2024.

“What we are seeing now is a bond carnival,” said Hideo Shimomura, a senior portfolio manager at Fivestar Asset Management Co. in Tokyo.

“Bond investors have been hibernating and now I feel that their explosive desire is to come out of their lair.”

Small Caps were the day's biggest losers as yields spiked with The Dow outperforming. But a late-day sell-off spoiled the party for the S&P 500 (but The Dow ended just green)...



The S&P traded up to 4793 intraday (just shy of the closing high of 4796), but a late-day selloff tested unchanged and managed to close just green...



The Dow and S&P are up for 13 of the last 15 days and the S&P 500 is on track for its 9th straight green week - the longest winning streak in 20 years.



The last time the S&P 500 did a 10-week streak was in 1985.

'Most Shorted' stocks squeezed higher once again at the open but were sold almost constantly after that...



Source: Bloomberg

MAG7 stocks were sold late-on but ended green as a basket...



Source: Bloomberg

Credit markets disagreed with equities today - for a recent change - with HYG (HY Corporate bond ETF) tumbling



Source: Bloomberg

Treasuries were sold today, hurt by an ugly tail for the 7Y auction, but remain lower on the holiday shortened week. A late-day buying program in bonds reduced the pain and left the belly underperforming (5Y +5bps, 2Y and 30Y +3bps)...



Source: Bloomberg

The world’s debt market is on track to post its biggest two-month gain on record as traders ramp up expectations that central banks everywhere will slash interest rates next year.



Source: Bloomberg

The Bloomberg Global Aggregate Total Return Index has risen nearly 10% over November and December, its best two-month run in data going back to 1990.

“The ferocity of the bond market rally has really augmented the total returns for investors,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore.

“There’s a feeling markets are signaling we’re heading half-way toward easy monetary policy again.”

The dollar rallied back from yesterday's slump, erasing around half of that decline today...



Source: Bloomberg

Ethereum managed to cling to green today, but was well off its overnight highs by the end of the US session...



Source: Bloomberg

Bitcoin, however, was pummeled back below $42,500 before finding support...



Source: Bloomberg

Which combined means that ETH/BTC has broken the key resistance



Source: Bloomberg

Spot Gold hit $2088 highs overnight but faded all day with a good kick from Benoit as Europe opened...



Source: Bloomberg

Oil prices extended yesterday's losses with WTI breaking down to a $71 handle - the lowest in a week...



Source: Bloomberg

Finally, as Bloomberg's Vincent Cignarella notes, the S&P is in the 3rd wave of the 5-wave Elliott theory which is typically its most powerful and extended. Upon completion, the index will enter the 4th wave, a correction.



Source: Bloomberg

How far is anyone's guess but the last one which began in January of 2022 lasted around 10 months for a 20-25% drop.

While a correction seems a certainty, there’s plenty of time left to devise a risk-off strategy of your choosing. The chart suggests the index may still climb above 4900 - a new record high - before rolling over.

 

Powell's Pivot Adds $20 Trillion To Global Debt/Equity Markets In 2023; 'Fiat Alternatives' Fly
FRIDAY, DEC 29, 2023 - 04:00 PM

Global bond and stock markets added almost $20 trillion in capitalization during 2023... and all of that gain came in the last two months of the year after it had tested unchanged on Oct 28th! The gains were dominated by global stocks (which added $13.3TN) while global bonds rose by $6.1TN...



Source: Bloomberg

Nasdaq soared to its best year since the peak of the dotcom bubble in 1999 (and the rest of the US major equity market indices all rallied).



Source: Bloomberg

Bonds ended higher in price (lower in yield) on the year. Gold up, dollar down, oil down, NatGas collapsed as The Fed shocked the world, suddenly flipping from uber-hawk to full-dove-tard...



But, but, but, The Fed is apolitical?



We think not!



Is that how it played out?

And they did all that with 'hard' economic data unchanged in 2023 - no real economic progress - as only 'soft' data (hopes and dreams) provided support for 'goldilocks' narratives...



Source: Bloomberg

But, 2023 was dominated by a few themes:
The Magnificent 7 stocks dominated the price action and outsized index gains in 2023. Investors preferred the 'safe haven' of these mega-cap tech names over longer-duration profit-less tech... until The Fed unleashed hell at the start of November and everything exploded higher...



Source: Bloomberg

Which left a record 72% of stocks in the S&P 500 have under-performed the index this year



Source: Bloomberg

AI - the apparent benefits of AI know no bounds when it comes to investment as Goldman's basket of AI stocks soared over 90% this year (while businesses 'at risk' of AI's impact rose 17% - helped by the everything rally in the last two months)...



Source: Bloomberg

Anti-Obesity Drugs - losing weight the easy way appealed to investors in 2023 as the GLP-1 analogs sparked a surge in biotech/pharma (and hurt food/beer stocks)...



Source: Bloomberg

Banks - SVB's collapse in March sparked an exodus of deposits and demand for Fed bailouts. Regional bank stocks ended the year down just 8% having bounced back from being down around 40% in May (despite record usage of the Fed's bailout facility)...



Source: Bloomberg

Meme Stocks - Retail favorites had a wild year but ended up 25% in 2023, the best year since 2020's chaos, thanks again to the last two months of panic-buying, dash-for-trash trading after The Fed folded...



Source: Bloomberg

Cryptos - 2023 was a huge comeback year after 2022's 'existential threat' moments from FTX to TerraUSD and so on. Of the larger coins, Solana massively outperformed - up around 1000% on the year - but bitcoin (+160%) and ethereum (+100%) also had big years...



Source: Bloomberg

Bonds - Global bonds ended the year with the largest two-month gain in history...



Source: Bloomberg

And that rally pulled the entire curve lower in yields on the year with the 5Y the biggest decliner, down 19bps on the year - after bloodbathing up around 100bps at its highs in October. Bear in mind that Fed Funds added 100bps this year and bond yields are all lower...



Source: Bloomberg

Liquidity - stocks did what they do: follow the money. As macro data disappointed, stocks charged ahead on a re-emerging wave of global liquidity...



Source: Bloomberg

Rate-cuts - It was a very volatile, flip-floppy year for The Fed and Fed-watchers as rate-cut expectations swung wildly from 160bps to less than 60bps to more than 160bps to just 70bps and now back to highs above 160bps (more than 6 cuts, when The Fed 'dots' are calling for 3)...



Source: Bloomberg

Additionally, the odds of a rate-cut as soon as March are now near 90% (up from less than 10% in September)...



Source: Bloomberg

Financial Conditions - The rally in bonds, stocks, and credit - and collapse in the dollar - since The Fed signaled the end of hikes prompted the most aggressive easing of financial conditions ever. Financial conditions are now as easy as they were in May 2022 - when Fed Funds was 300bps below current levels...



Source: Bloomberg

No Recession - expectations heading into 2023 was for a recession - it never came to pass on the backs of exponentially rising govt debt throughout the year and Fed jawboning that lifted macro data in the last month



Source: Bloomberg

Cash Is King - Money-market funds saw their largest annual inflows ever...



Source: Bloomberg

Gold - A weaker dollar, signals of loosening from The Fed, and a world on fire means no one should be surprised by gold's great year, up almost 14% (best year since 2020) to a new all-time record high...



Source: Bloomberg

* * *
Under the hood of the markets this year.

Equities
2023 ended on a down-note with all the US majors tumbling into the red for the week, erasing Santa Claus rally gains, but the afternoon saw dip-buyers return and rescue the weekly win-streak...



Both 'Most Shorted' stocks and the MAG7 were also hit...





Source: Bloomberg

Tech and Consumer Discretionary dominated the performance this year with Staples and Utes the biggest losers (Energy was the other losing sector on the year)...



Source: Bloomberg

Nvidia, Meta Platforms, and Royal Caribbean were the best-performing S&P 500 stocks in 2023 while FMC Corp, Enphase Energy, and Dollar General were the biggest losers...



Source: Bloomberg

While VIX was smashed to an 11 handle at its lows of the year (multi-year lows), it notably decoupled from stocks in the last few weeks



Source: Bloomberg

Small Caps outperformed Nasdaq in the first few months of the year, then the AI boom struck and Nasdaq exploded higher relative to Small Caps (as the latter was hit harder by soaring rates). The last month has seen dramatic outperformance of Small Caps, dragging the NDX/RTY ratio lower...



Source: Bloomberg

But, overall, Nasdaq's dramatic outperformance this year lifted it to a new record high relative to Small Caps... and then fell back (as Small Caps outperformed) to the dotcom highs...



Source: Bloomberg

Bonds
Only the 2Y yield and earlier remain above 4.00%, but the curve is massively inverted from Fed Funds...



Source: Bloomberg

After 2022's massive flattening/inversion of the yield curve, 2023 saw 2s30s actually end steeper (the first steepening year since 2020). The yield curve de-inverted a few times during the year but was unable to sustain it...



Source: Bloomberg

Real yields ended the year basically unchanged - after soaring to their highest since 2008 in October. Since then 10Y real yields have plummeted almost 100bps...



Source: Bloomberg

If S&P 500 valuations are to be believed, the market is expecting negative real yields again soon enough...



Source: Bloomberg

FX
The dollar ended lower against its fiat peers in 2023 (BBDXY -2.9%) - its biggest drop since 2020 back to pre-COVID-spike levels...



Source: Bloomberg

Swissy was the best performing currency (of the majors) against the dollar while Japan's yen was the weakest.



Source: Bloomberg

The Swiss Franc soared to its best year since 2010 and its highest since 2011 (in the middle of the EU crisis)...



Source: Bloomberg

The Japanese Yen spent the first 10 months of 2023 plunging to its weakest against the dollar since 1990. Then as The Fed's dovish pivot and BoJ's hawkish jawboning picked up, the yen surged higher (finding support at Oct 2022 lows)...



Source: Bloomberg

Emerging Market currencies plummeted to their weakest ever (on an indexed level) against the USdollar at the start of October, but the last two months have seen EM FX recover notably as The Fed pivoted...



Source: Bloomberg

Cryptos
The big story of the year was the anticipation of a spot bitcoin ETF, and nowhere is that more clearly illustrated than in the collapse of the massive discount to NAV in GBTC...



Source: Bloomberg

Bitcoin's rally in 2023 erased all of the 'existential' crisis crash losses from 2022 (FTX/TerraUSD/3AC etc.), up to its highest level since April 2022...



Source: Bloomberg

Ethereum did have a good year but only made it back to May 2022 highs...



Source: Bloomberg

ETH underperformed BTC all year until the last week or so that saw ETH/BTC bounce significantly off June 2022 support...



Source: Bloomberg

Commodities
The broad commodity landscape saw prices plunge in 2023 with Bloomberg's Commodity Index down over 12% - its worst year since 2015...



Source: Bloomberg

And that plunge in (growthy) commodities is in direct conflict with the large gains in (growthy) stocks.

Gold outperformed among the major commodities (best year since 2020 - after two unchanged years) while crude fell YoY for the first time since 2020. NatGas was clubbed like a baby seal to start the year and never recovered for its worst year since 2001...



Source: Bloomberg

On an energy-equivalent basis, NatGas was systemically 'cheap' to WTI all year after the huge selloff in January...



Source: Bloomberg

The big gains in gold over the last two months reversed the outperformance of oil in the prior quarter, bring the Oil-in-Gold ratio (how many oz of gold to buy a barrel of oil) back down to a key support level in recent years...



Source: Bloomberg

And Finally...
If history rhymes, we can expect this buying-panic-gasm to continue into Q1 as it did in 2000...



Source: Bloomberg

And if you want to know what the catalyst could be in March - it will be the next big banking crisis as The Fed is forced to shut down the BTFP (since it is spewing free-money via arbitrage).

Politically, next year is a big one which makes it noteworthy that for the third year in a row, foreign-born workers dominated all job gains with the native-born American labor force basically unchanged since Biden's election...



Source: Bloomberg

This trend is not America's friend...



Source: Bloomberg

China and Russia are dumping Bonds and buying Bullion.

And the market is starting to sniff it out. 2023 saw the biggest rise in the market's perception of USA's sovereign credit risk since the Lehman crisis in 2008...



Source: Bloomberg

Cloward, Piven, and Chomsky would be proud.

And on that note - happy new year!!

 

2024 Starts With Bitcoin Breakout, Crude Collapse, Mega-Cap Meltdown
TUESDAY, JAN 02, 2024 - 04:00 PM

Weaker than expected construction spending data and a dismal (final) Manufacturing PMI print for December suggested 2024 is not off to the 'goldilocks' start so many hoped for.



However, despite the 'weak' data, Treasury yields were higher and the dollar stronger.

Treasury yields were up across the board with the short-end underperforming (2Y +9bps, 30Y +5bps). Yields gapped higher to open and then traded in a narrow range from the European open...



Source: Bloomberg

The 10Y yield gapped up to three-week-highs, hovering at the post-FOMC plunge levels...



Source: Bloomberg

The dollar ripped higher to start 2024 - its biggest daily gain since March 2023...



Source: Bloomberg

Mega-Cap stocks took a beating (not helped by AAPL downgrade), erasing all of December's gains...



Source: Bloomberg

AAPL tumbled to near two-month lows...



Semis suffered their biggest daily drop since Dec 2022...



...and that dragged Nasdaq down to its biggest drop in over two months, underperforming the rest of the US Majors. A late-day mini-melt-up added a little lipstick to this pig and The Dow was the least ugly horse in today's glue factory...



Dow futures perfectly roundtripped to Friday's cash close levels today...



Major u-turn in 'most shorted' stocks too today. Gap down open immediately squeezed higher, only to rapidly give it all back after Europe closed...



Source: Bloomberg

Bitcoin broke-out today above the early December highs to its highest since April 2022, coming within a few ticks of $46,000...



Source: Bloomberg

Ethereum also rallied on the day, above $2400 intraday, but underperformed Bitcoin, dragging ETH/BTC down



Source: Bloomberg

The strength of the dollar weighed on gold which ended down only modestly on the day (after losing overnight gains)...



Source: Bloomberg

But, perhaps the most notable move today was in the energy patch.

Oil prices surged overnight amid growing tensions in the MidEast but then, at around 9amET, WTI was unceremoniously dumped as if any war/geopl risk premium was entirely worthless. And then it legged down again despite headlines that Israel had killed a senior Hamas official in Beirut (potentially drawing Iran even more explicitly into the melee)...



Finally, President Biden's stock market performance continues to lag that of President Trump's...



Source: Bloomberg

...but just you wait until March or April when the Biden admin will crow at their outperformance (compared to Trump's COVID collapse)

Investors are back at 'Extreme Greed' levels...



Source

Doesn't look good for Santa-Rally support... and for the last five years, as goes the first 5 trading days, so goes the year...



Source: Bloomberg

With 150bps of rate-cuts priced in for 2024, there is not much room for error.

 

Global Bonds & Stocks Suffer Biggest Rout To Start A Year Since 1999
WEDNESDAY, JAN 03, 2024 - 04:00 PM

2024's tumble in stocks and bonds was the biggest global rout to start the year since 1999 (and yesterday was the biggest daily drop in global capitalization since Dec 2022)...



And while stocks and bonds tanked, the dollar soared...



Source: Bloomberg

The dollar has not fallen at the start of a calendar year since 2012, but the start of 2024 is the biggest rally since 1997...



And the trend of weak economic data continues with ISM Manufacturing in contraction (below 50) for the 15th straight month, and JOLTS data confirming cracks starting to appear in the labor market...



Source: Bloomberg

The FOMC Minutes today were significantly less dovish than the market (and Jay Powell) suggested and March rate-cut odds faded modestly...



Source: Bloomberg

No bounce at all in stocks after yesterday's ugliness is putting the weekly win streak at risk of ending at nine. Small Caps were clubbed like a baby seal today (down almost 3%) and Nasdaq extended yesterday's loses (down around 1% today). The Dow remains the least ugly horse in 2024's glue factory...



MAG7 couldn't catch any bid at all today...



Source: Bloomberg

And 'most shorted' stocks puked at the open and didn't bounce/squeeze at all...



Source: Bloomberg

S&P is down for the first two days of the year for the first time since 2015 and suffered the worst return start to a year since 2019 (which was after the end-2018 crash that Powell rescued stocks from)...



The Russell 2000 has crashed back to a critical level (its 21DMA), down over 5% from its highs last week...



Source: Bloomberg

Goldman noted that US equities were only rescued yesterday by a large BUY imbalance on the close (which seemed to suggest retail/household $ deployments into the market to start the year)...



Source: Bloomberg

And one more tidbit before we move on to bond-land, healthcare dramatically outperformed MegCap Tech by the second most in the last 12 months...



Source: Bloomberg

Treasury yields tumbled in the afternoon as IG issuance dried up and rate-locks were lifted. On the day the belly outperformed (5Y-10Y -2bps) which left the 2Y yield just a smidge higher on the week...



Source: Bloomberg

10Y Yield tested above 4.00% but quickly fell back. That is a 10bps plunge intraday fore the 10Y yield...



Source: Bloomberg

Perhaps today's most notable market mover was crypto which saw a significant flash-crash around 0630ET, led by a 7% plunge in Bitcoin, from $45,500 to $41,000 before bouncing back...



Source: Bloomberg

Ethereum also puked and is now underwater for the year, while bitcoin is a little stronger still...



Source: Bloomberg

Oil prices ripped back higher today as reality bit that MidEast violence was anything but calming down...



Source: Bloomberg

Gold dropped back again as the dollar rallied...



Source: Bloomberg

Finally, today was deja vu all over again in equity futures-land...



Which European is doing all the selling? SNB? (Look at AAPL- their biggest holding).

 

'Goldilocks' Gored By Growth Gains; Bitcoin Bounces As Rate-Cut Hopes Hammered
THURSDAY, JAN 04, 2024 - 04:00 PM

Strong jobs data (ADP jobs added more than expected, slowing wage growth, and initial jobless claims at 2023 lows) and strong Services economy survey data (PMI at 5 month highs) prompted higher Treasury yields today, and sent rate-hike expectations tumbling for March...



Source: Bloomberg

In the words of one veteran trader (who happens to be long and wrong), "the growth's just too damn hot... The Fed can't stand by as the market runs wild on rate-cut hopes." (edited for NSFW words)

And rate-cut expectations for 2024 have tumbled overall...



Source: Bloomberg

And yields surged back to (or above) yesterday's highs (curve basically all up around 6-7bps today). It's been an ugly week for bonds to start 2024...



Source: Bloomberg

As the 10Y Yield surged back up to 4.00% (and stalled again)...



Source: Bloomberg

The 10Y yields has broken back above its recent downtrend line...



Source: Bloomberg

And the longest-duration stocks suffered (MAG7 has erased all of December's gains)...



Source: Bloomberg

And as goes MAG7, so goes the market (for now) as the 492 ain't helping. Nasdaq was the day's biggest loser while The Dow managed very small gains. A late-day slump ($4BN MoC to sell), wiped off any lipstick left on any pigs...



Nasdaq is down 5 days in a row - the longest losing streak since Dec 2022.

Small Caps (Russell 2000) and Big-Tech (Nasdaq) are down around 3.5% to start the year...



The S&P is down almost 2% - the worst start to a year since 2008

The 200bps underperformance of Nasdaq relative to the S&P 500 in the last 5 days is among the largest in the last two years...



And it's not just an AI thing as AI-at-risk names are down just as much in 2024 so far...



Source: Bloomberg

Anti-Obesity drug names are outperforming though in 2024 so far...



Source: Bloomberg

Value stocks have outperformed growth for the last few weeks, breaking the downtrend...



Source: Bloomberg

After yesterday's pukefest to $41k (on nothing), Bitcoin ripped back up to $44k today as the spot ETF approval seems imminent-erer...



Source: Bloomberg

The dollar rallied for the 5th straight day (its longest win streak since September), rallying back during the European session after Asian weakness. This is the best start to a year for the dollar since 2005.



Source: Bloomberg

Oddly - again - with 'growth' fears sparking higher yields, lower rate-cut hopes, oil prices... tumbled. The driver was major inventory builds in gasoline and distillates (because the middle east is still a shit-show). WTI came within a tick of $74 intraday overnight before dropping back to almost a $70 handle before bouncing back...



Spot Gold managed very modest gains on the day, holding above $2040...



Source: Bloomberg

Finally, financial conditions are starting to tighten (a little for now, but that's a start)...



Source: Bloomberg

And remember The Fed Minutes specifically pushed back against too much exuberance in financial markets:

“Many participants remarked that an easing in financial conditions beyond what is appropriate could make it more difficult for the Committee to reach its inflation goal.”

So, be careful what you wish for - the porridge is too hot for Goldilocks here and if tomorrow's payrolls print is 'hot', hopes and dreams of 'just right' rate-cuts in 2024 will be dashed on the hungry chins of ravenous bears.

 

Global Markets Suffer Worst Start In Over 20 Years As 'Soft' Data Stalls, Financial Conditions Tighten
FRIDAY, JAN 05, 2024 - 04:00 PM

In terms of total wealth destroyed, 2024 has started with the worst record ever as global bond and stock markets saw over $3 trillion wiped away...



The losses are dominated by global stocks (down around $2 trillion), while bonds are down around $1 trillion (but still up massively from the major inflection point at the start of November)...







Source: Bloomberg

This shift has dramatically changed the trend for financial conditions (which have tightened by the most over the past week since October)...



Source: Bloomberg

And hope is rung out of the economy as 'soft' data starts to catch down to 'hard' data's somber reality...



Source: Bloomberg

Despite initial appearances (payrolls rose more than expected), the jobs reports was a shitshow and markets began to realize it after a while with rate-cut hopes, bond yields, gold and stock prices all reversing the initial kneejerk move.

Rate-cut expectations initial tumbled on the 'good' jobs data then whipped higher on the 'bad' ISM before settling back around unch on the day (though March odds and 2024 total cuts both hawkishly dropped this week)...





Source: Bloomberg

All the US Majors were down to start the year with Small Caps and Nasdaq the biggest losers (down around 3.5-4%). The Dow was the least harmed but still down 1% on the week



This was Nasdaq's worst week since last March.

Today saw stocks swing wildly around the macro data but a late day charge lifted most majors barely green...



Magnificent 7 stocks saw over $400 Billion of market cap wiped away this week, erasing all of December's gains...



Source: Bloomberg

As financial conditions have tightened so the laggards that became major leaders in the last two months of 2023 have once again become laggards...



Source: Bloomberg

Anti-Obesity drug-stocks managed gains on the week...



Source: Bloomberg

Notably, this was not a "AI-bubble-burst" moment - as AI-beneficiaries and those 'at risk' from AI were both hit just as hard this week as rates rose...



Source: Bloomberg

While the entire curve was higher in yield on the week, 30Y yields rose the most (up 16bps - the second biggest yield jump to start a year since 2011)



Source: Bloomberg

...but 2Y yields were up 13.5bps - the biggest yield increase to start a year since 2005...



Source: Bloomberg

Today was a little more crazy that most with yields spiking on payrolls beat, then tumbling on ISM Services miss, then rising back as the ugly reality of the jobs data hit home.



Source: Bloomberg

That was a 17bps hi-lo range for 2Y yields...



Source: Bloomberg

The dollar rallied to start the year and had a wild day today (like bonds)...



Source: Bloomberg

Gold fell to start the year but not after ramping up to green for a few brief minutes after this morning's weak ISM...



Source: Bloomberg

Oil prices chopped around wildly this week but ended higher - in fact WTI had its best week since October trading up to $74...



Source: Bloomberg

Finally, are cyclical stocks about to start rolling over and catching down to the de-growth reality of US macro and oil prices?



Source: Bloomberg

That's quite a gap! Can stocks remain buoyant as reserves bleed?



Source: Bloomberg

Meanwhile, the AAPL has fallen far from the tree (down almost 10% from its record highs...



Source: Bloomberg

...far enough to now be 'oversold'.

 

Bitcoin & Big-Tech Burst Higher Amid Bloodbath In Boeing & Black Gold
MONDAY, JAN 08, 2024 - 04:00 PM

A quiet macro day (though we did see NYFRB inflation expectations plunge!), but some 'good' news from Washington reduced the risk of govt shutdown in 11 days modestly.

However, there was plenty of new narrative creation from FedSpeak. Logan and Bostic double-whammy'd with 'not as dovish as the market thinks' comments on rates BUT 'more dovish than the market thinks' on Fed balance sheet runoff...

• *LOGAN: FED SHOULDN'T DISCOUNT POSSIBILITY OF ANOTHER RATE HIKE
  
  
• *LOGAN: IF FINANCIAL CONDITIONS LOOSEN, INFLATION RISKS A PICKUP
  
  
• *LOGAN: FED SHOULD BEGIN DISCUSSION ON SLOWING ITS ASSET RUNOFF
  
  
• *BOSTIC: FED CAN LET RESTRICTIVE MONETARY POLICY PROCEED
  
  
• *BOSTIC: EXPECTS FIRST RATE CUT IN THIRD QUARTER
  
  
• *BOSTIC: OPEN QUESTION ON WHETHER ASSET RUNOFF PACE SHOULD CHANGE

This prompted March rate-cut odds to decline a little more...



Source: Bloomberg

But sent Swap-spreads significantly higher, a warning sign from the market on potential liquidity issues ahead...



Source: Bloomberg

Treasury yields were lower across the curve with the belly outperforming. The bulk of the buying took place in the European session...



Source: Bloomberg

The 10Y yield broke back below 4.00% intraday (though held above Friday's lows), but ended above 4.00%...



Source: Bloomberg

Negative gamma (meaning moves are exaggerated one way or the other) combined with lower yields and dovish Fed comments sent stocks soaring, led by mega-cap tech (laggards to leaders) and small caps (short-squeeze-fest). The Dow lagged thanks to Boeing's bloodbathery...



0-DTE traders bought calls with both hands and feet with massive positive delta flow all day and a late-day spike at the close...



Source: SpotGamma

Tech (and Discretionary) sectors outperformed today while the only red sector was Energy which was hammered as crude crumbled...



Source: Bloomberg

'Magnificent 7' stocks soared higher today, erasing 75% of the losses for the year...



Source: Bloomberg

'Most Shorted' stocks squeezed hard today, erasing around half of the YTD losses to Friday's close...



Source: Bloomberg

Retail favorite (meme stocks) rallied hard today...



Source: Bloomberg

The dollar limped lower on the day but held above Friday's whiplash lows...



Source: Bloomberg

Bitcoin exploded higher today amid growing anticipation of the SEC's imminent approval of a spot ETF...



Source: Bloomberg

That sent the largest cryptocurrency to its highest since March 2022 - before all the existential crisis (TerraUSD, FTX, 3AC etc) struck...



Source: Bloomberg

And Ethereum underperformed, now at its weakest since April 2021...



Source: Bloomberg

Despite the dollar weakness - and Fed dovishness - spot gold prices declined, but found support at $2020, near the top of the FOMC-day spike...



Source: Bloomberg

But the big news was in black gold as WTI crashed to a $70 handle...



Finally, the 'good' news for Biden is that the lower oil prices have pulled the price of Regular Gasoline at the pump to its lowest since May 2021...



Source: Bloomberg

...but that's still 37% higher than when Biden came into office.

 

Bonds, Bullion, & Big-Tech Quiet As Data-Deluge Looms
TUESDAY, JAN 09, 2024 - 04:00 PM

Ahead of Thursday's CPI print and Friday's bank earnings, bond markets were quiet today, stocks were choppy, but the S&P ended unchish. Gold was also unch and crypto trod water.



The S&P 500 ended lower, Nasdaq outperformed as the cash open saw BTFDing from the overnight losses, but even the tech-heavy index only managed only very small gains thanks to a last second pop on the day. The Dow and Small Caps lagged...



MAG7 stocks extended yesterday's rip - up to almost unchanged YTD...



Source: Bloomberg

As 'most shorted' stocks squeezed off the opening gap-down for the 3rd day in a row. But late-day saw selling pressure hit...



Source: Bloomberg

Gold ended unch...



Source: Bloomberg

Swap Spreads were flat...



Source: Bloomberg

Rate-cut expectations for 2024 were basically flat on the day...



Source: Bloomberg

The yield curve was flat...



Source: Bloomberg

A solid 3Y auction at 1300ET supported yields overall as they declined 1-2bps broadly speaking. Yields are lower on the week, led by the belly...



Source: Bloomberg

10Y tested down to 4.00% and bounced again...



Source: Bloomberg

2Y Yield range was extremely narrow - just 4bps from high to low...A very 'inside' day...



Source: Bloomberg

...one of the smallest ranges in years...



Source: Bloomberg

Ethereum decoupled completely (lower) from Bitcoin today as the world anticipated the SEC approving spot ETFs on the latter...



Source: Bloomberg

The dollar rallied almost non-stop from the late-Asian session...



Source: Bloomberg

While the dollar was higher and gold flat, crude oil actually managed a rally today with WTI back above $72...



Source: Bloomberg

Finally, there was some life in vol-land as the rest of the week is pricing in at least 'some' event risk...



Source: Bloomberg

Of course, that's just another opportunity for 0-DTE traders to sell-the-straddle and stoke their Sharpe Ratios to the moon.

 

Bonds & Black Gold Dip, Big-Tech Rips As Event Risk Looms
WEDNESDAY, JAN 10, 2024 - 04:00 PM

A nothing-burger of a day from a macro (and micro) perspective left stocks and bond yields to drift higher ahead of tomorrow's big inflation print and bank earnings on Friday.

The only thing of note occurred in the last hour when Fed's Williams who appeared to push back against the recent dovish narrative of tapering QT earlier than expected (he was also hawkish on rates)...

• *WILLIAMS: DON'T SEEM CLOSE TO POINT OF SLOWING ASSET RUNOFF
  
  
• *WILLIAMS: NEED TO MAINTAIN RESTRICTIVE STANCE 'FOR SOME TIME'
  
  
• *WILLIAMS, CITING FED'S BARR, SAYS BTFP EXPECTED TO END MARCH 11!

That wiped lipstick off the equity market 'pig' gains, pushing Small Caps into the red on the day. The SEC approved the spot Bitcoin ETF at the bell and tha seemed to spark a panic bid in stocks, lifting Small Caps back to unchanged and Nasdaq to a strong day...



Today was dominated by 0-DTE Call-buying all day... with barely any solid put-buying or -selling. The call-buying stalled when Williams wrecked the party...



Source: SpotGamma

Despite the surge in stocks, VIX was flat today ahead of the event risk of the next two days...



Source: Bloomberg

Most notably, MAG7 stocks continued to surge, up 5% in the last three day and into the green YTD...



Source: Bloomberg

Treasury yields were net modestly higher (+2bps) but the intraday swing was notable. The 30Y yield inched up to be higher on the week while the belly outperforms...



Source: Bloomberg

Another tail at the 10Y auction did not help and yields pushed higher from overnight late-Asia buying lows, and back above 4.00% again...



Source: Bloomberg

The dollar was dead-stick today with barely a blip



Source: Bloomberg

While the world waited in anticipation of the SEC approving a spot bitcoin ETF, Ethereum is dramatically outperforming Bitcoin...



Source: Bloomberg

...erasing all of the relative YTD weakness...



Source: Bloomberg

Oil prices pulled back today after testing up towards the top of the YTD range...



Source: Bloomberg

Gold dipped back to $2020 (spot) - key support...



Source: Bloomberg

Finally, VVIX (the implied vol of implied vol) has collapsed in recent days...



Source: Bloomberg

Among the lowest levels of expected vvol in the last 10 years...



Source: Bloomberg

The last time VVIX was this low was right before the SVB collapse.

 

Hot-flation Hammers Hope: Crypto Rips As Yield-Curve Bull-Steepens
THURSDAY, JAN 11, 2024 - 04:00 PM

Bitcoin (spot) ETFs dominated the overnight headlines as they started trading after the begrudging SEC approval last night. That sparked a large wave of buying in both the ETFs (when cash markets opened) and the underlying with both ETH and BTC soaring to cycle highs (before some profit-taking hit). Ethereum has been the big winner...



Source: Bloomberg

That erased all of Ethereum's relative weakness to Bitcoin YTD...



Source: Bloomberg

Bloomberg's Eric Balchinas points out that the Spot Bitcoin ETFs were a huge hit...

+0.31% MoM - 1 basis point above consensus (+0.30%) and 3 basis points hotter than November (+0.28%) - that was enough to wipe the lipstick off the goldilocks Core CPI disinflation-extrapolation narrative and spook markets back to a less-than-utopian soft-landing scenario possibility today. Additionally, initial and continuing jobless-claims both declined more than expected - adding to the 'well, how are you going to cut rates into that' argument.

A quick look under the hood of the S&P 500 early in the day was illustrative of this concern: sectors that benefit from a lower rate regime - Utilities and the FANGMAT complex - were underperforming; while traditionally defensive sectors including Consumer Staples and Health Care were outperforming... but that all changed as yields fell and stocks ripped back higher...

Nasdaq outperformed, battling to stay green for the last hour or so. Small Caps were the biggest loser...



FedSpeak today pushed back a little on the dovish bias we have heard recently - but not aggressively

1150ET *FED'S MESTER SAYS MARCH IS PROBABLY TOO EARLY FOR A RATE CUT

1300ET *FED'S BARKIN: NEED TO BE CONVINCED INFLATION IS STABILIZING

but, despite that and hotter CPI, rate-cut expectations soared (perhaps as traders look-ahead at higher frequency indicators of shelter, used-car costs slowing)...



Source: Bloomberg

'Most Shorted' stocks were hammered lower today as once again (every day in 2024) they were hit at the open. Today, the squeeze back failed to impress...



Source: Bloomberg

'Magnificent 7' stocks spiked at the open, tumbled and then were bid back to unchanged by the close...



Source: Bloomberg

Treasury yields were all lower on the day - tumbling hard after the initial kneejerk higher on the hot CPI. The short-end of the curve dramatically outperformed...



Source: Bloomberg

Once again all the action in 10Y pivoted around 4.00% - this time ending below it...



Source: Bloomberg

Massive yield-curve bull-steepening today lifted 2s30s to its least inverted since early November...



Source: Bloomberg

The dollar round-tripped on the day, ramping on the hit CPI then fading the rest of the day and ending lower...



Source: Bloomberg

Spot Gold prices tumbled back below $2020 on the hot CPI then bounced back (again)...



Source: Bloomberg

Oil prices managed to hold on to gains today with WTI falling back to $72 after nearing $74 (the top of its recent range)...



Source: Bloomberg

Finally, the price of stuff (CPI) - most notably food - has never - ever been higher than today...



Source: Bloomberg

...and, no matter what your politician tells you, the average joe is simply not keeping up in terms of wages...



Source: Bloomberg

Additionally, The Fed's reverse repo facility was over $53BN withdrawn from it today to a new cycle low...



Source: Bloomberg

...tick tock for The Fed as the March expiry of BTFP (and a 'zero' RRP) mean QT has to taper, but can they do that without cutting rates?

 

Yield Curve Dis-Inverts As 'Ummm-flation' Sparks Surge In Rate-Cut Odds, Ethereum, & MAG7 Stocks
FRIDAY, JAN 12, 2024 - 04:00 PM

'Cooler-than-expected' PPI (along with lower inflation expectations from NYFRB's survey) trumped 'hotter-than-expected' CPI this week and opened the floodgates for traders to bet on The Fed being dovish-er than they expect to be in 2024.



Source: Bloomberg

Will The Fed comply?



The odds of a cut in March have soared above 80% (despite all the FedSpeak jawboning away from that)...



Source: Bloomberg

Expectations for 2024 rate-cuts exploded to new highs at 170bps (now fully pricing in 6 cuts and a 65% odds of a 7th cut)...



Source: Bloomberg

And as rate-cut expectations soar, so the spread between 2Y yields and current Fed Funds nears record highs...



Source: Bloomberg

Of course, as a reminder, the real reason The Fed will be cutting rates is to avoid a banking crisis which looms large in March...

...as the pace of liquidation at The Fed's RRP is accelerating...



Yields tumbled across the entire curve this week,,, except for the long-end (which was unchanged)...



Source: Bloomberg

With 10Y back below 4.00%...



Source: Bloomberg

..and the 2y Yield at its lowest since May '23 (and the same level as it was in Sept '22)...



Source: Bloomberg

Sparking a massive bull-steepening in the curve - dis-inverting the 2s30s segment...



Source: Bloomberg

For context, this is the 'steepest' and most un-inverted the (2s30s) curve has been since July 2022...



Source: Bloomberg

However, while inflation was on many people's minds, crypto also dominated the headlines with Gensler dragged kicking-and-screaming across the finish-line of spot bitcoin ETF approval.

Bitcoin ended the week marginally lower (after early week gains evaporated on 'sell-the-news' flow)...



Source: Bloomberg

...as Ethereum soared 16% (its best week since January 2023)



Source: Bloomberg

IBIT - the iShares BTC ETF - is err underperforming (to say the least) since the open yesterday...



Source: Bloomberg

Nasdaq surged over 3% on the week (best week since early Nov '23) while The Dow and Small Caps were unchanged (S&P closed up almost 2% on the week)



Nasdaq's strength was driven by the 'Magnificent 7' stocks' best week since early Nov '23...



Source: Bloomberg

Thanks to MAG7, Tech was the best performer on the week as Energy lagged heavily. Financials ended the week lower...



Source: Bloomberg

Microsoft overtook Apple as the world's most valuable company (as TSLA faded this week)...



Source: Bloomberg

'Most Shorted' stocks were down 4% (AGAIN) on the week, erasing more than half of the Fed-driven short-squeeze from December...



Source: Bloomberg

Bank earnings today prompted quite chaotic trading among the big names with most generally disappointing by the close ...



Source: Bloomberg

Gold (spot) rallied significantly in the last two days (from below $2020 to above $2060), finding support at the top of December's FOMC spike...



Source: Bloomberg

Amid tanker attacks by the Houthis and retaliatory missile strikes by US allies, oil prices were lower on the week - of course they fucking were... as the $71-$74 range remains glue, no matter what is going on in the real-world...



Source: Bloomberg

Finally, we note that on both the day that ETFs have been trading, the spot cryptocurrencies themselves have been aggressively sold from the US equity open to the European equity close - at which point selling stops...



Source: Bloomberg

A suddenly tumbling crypto universe would be very convenient for Liz Warren, Gary Gensler, Jamie Dimon, Christine Lagarde, and a whole host of naysayers who were quick to point out Bitcoin's lack of worth for anything but the enablement of terrorism or child sex-trafficking... and all the worst bits of the bible.

These three words seemed perfect for all that bullshit...

Remember to remember MLK on Monday as US markets are closed.

 

Stocks, Bonds, Oil, & Gold All Down As Waller Wrecks Rate-Cut Party
TUESDAY, JAN 16, 2024 - 04:00 PM

Comments by Governor Waller in a speech and discussion today raised the risk that the first cut could come slightly later than the market's expectation of March and that the pace of cuts could be quarterly from the outset, rather than the market's more aggressive forecast of three initial consecutive cuts followed by a switch to a quarterly pace.

On the timing of the first cut, Waller said he believes that the FOMC will be able to lower the funds rate “this year.”

On the speed of cuts, Waller said the funds rate “can and should be lowered methodically and carefully” and that he sees “no reason to move as quickly or cut as rapidly as in the past,” when the FOMC was combating recessions.

Waller also noted that next month's scheduled revisions to CPI inflation (the seasonal factors will be revised on February 9) could influence his thinking on rates cuts, especially if the revised data show a less clear deceleration recently.

The result was most evident in the drop in the market's expectations for a rate-cut in March...



Source: Bloomberg

...and expectations for 2024 rate-cuts declined also...



Source: Bloomberg

Treasury yields were higher across the curve with the long-end underperforming (from Friday's close)...



Source: Bloomberg

This was the 10Y yield's highest close since the Dec FOMC meeting (back above 4.00%)...



Source: Bloomberg

Financial conditions have eased back again from their tightening bias to start the year and remain near their loosest since August 2022...



Source: Bloomberg

Stocks did not like Waller's comments at all but while yields were higher, the growthy/long-duration tech stocks actually outperformed (ending red despite a late-day panic-bid algo ramp try to get green) while Small Caps were the most punished...



With bank earnings now mostly, all the majors are in the red since last Thursday's close with MS pummeled today...



Source: Bloomberg

MAG7 stocks drifted modestly lower on the day...



Source: Bloomberg

'Most Shorted' stocks continued the trend lower in 2024...



Source: Bloomberg

Bitcoin rallied back above $43,000 today, but well off the pre-ETF highs...



Source: Bloomberg

With ETF aggregate volumes still concentrated in IBIT and FBTC...



Source: Bloomberg

The dollar ripped higher today, almost entirely erasing the post-FOMC drop......



Source: Bloomberg

And as the dollar rallied, gold tumbled...



Source: Bloomberg

Oil edged lower on a choppy day - despite the shitshow in the Red Sea getting considerably worse...



Source: Bloomberg

And finally, EMFX was pummeled, with MXN puking over 2% (after Trump's big win last night?)...



Source: Bloomberg

...and given that move, it is worth considering how the election could impact markets.

Trump's odds of winning the election are now at the highest, and 3 ppts above Biden...



Source: Bloomberg

As Goldman notes, on balance, a Republican 'sweep' looks likely to increase the chances of a stronger USD, higher breakeven inflation rates, higher yields, and a steeper yield curve. It may also increase the tails in both directions for energy prices.



But, as the charts above show, there was little direct impact on macro markets until the Fall.

 

'Good News Is Bad News' As Goldilocks Reality-Check Wrecks Dovish Dreams
WEDNESDAY, JAN 17, 2024 - 04:00 PM

Retail sales - strong; Housing - homebuilder optimism jumped; Industrial Production - better than expected.

'Real' economic data is rising once again as 'soft' survey data collapses (Empire Fed anyone?)...



Source: Bloomberg

Nothing there screams "six rate-cuts or we all die" as the issue remains: the current growth trajectory of the economy does not suggest that rates need to come down at all.

And as this growth/rates tango persists, yields on 10-year Treasuries are creeping higher (up 4bp today to 4.10%), putting pressure on risk assets that are priced relative to rates.

Today's strong data, along with last week's slightly higher than expected inflation report may suggest to some that rate cuts may not be as necessary as urgently as markets have been pricing.. and Waller's comments yesterday pre-inforced that.

Sure enough, rate-cut expectations (timing and size) are tumbling...



Source: Bloomberg

The big drop in rate-cut expectations prompted bond yields to surge higher at the short-end. The entire curve was higher in yields with a major bear flattener (30Y +1bps, 2Y +13bps today)...



Source: Bloomberg

The 10Y Yield extended its spike back above 4.00% today and closed above its 200DMA for the first time since 12/12/23...



Source: Bloomberg

The yield curve (2s30s) flattened back into inversion today...



Source: Bloomberg

Higher-rates hammered hot stocks as growthy-stuff and crappy-stuff was dumped. Nasdaq and Small Caps lagged, The Dow was the least ugly cow in the abattoir but still lower. A late-day bounce put a bit of lipstick on the pg but still not a pretty day...



MAG7 dumped at the open and never recovered, falling back to unchanged YTD...



Source: Bloomberg

'Most Shorted' stocks dumped at the open... and went lower - no bounce at all!



Source: Bloomberg

This is the second-worst start to a year for 'most shorted' stocks in history (2016 was worse)...



Source: Bloomberg

Bitcoin continued in a narrow range since the chaos of last week's spot ETF launch...



Source: Bloomberg

The dollar extended its 'up and to the right' ramp this week. This is now the dollar's best start to a year since 2015.



Source: Bloomberg

And as the dollar rallied, so gold declines...



Source: Bloomberg

Oil was higher - for a change - with WTI bouncing off $71 back into its YTD range once again...



Source: Bloomberg

And finally, never forget the 'twin peaks' of the '70s...



Source: Bloomberg

Does Powell really want to be the guy who executed a massive rate-cutting cycle in an election year only to see what is left of The Fed's credbility utterly destroyed when inflation comes roaring back.

 

Stocks Gain As Senate StopGap Trumps Hindenbergs, HawkSpeak, & Hard-Data 'Bad News'
THURSDAY, JAN 18, 2024 - 04:00 PM

While 'soft' data has been in free-fall recently, 'hard' data has been uncomfortably (for the hard-landing/recession/seven-rate-cut crowd) outperforming recently (retail sales, housing starts/permits, jobless claims all beat recently as Philly Fed survey disappointed)...



Source: Bloomberg

That hawkish tilt was helped along by more FedSpeak today - singing from the same 'more hawkish than the market expects' hymn-sheet - as Bostic reiterated his expectation that rate-cuts won't begin until the third quarter.

“In such an unpredictable environment, it would be unwise to lock in an emphatic approach to monetary policy,” Bostic said in prepared remarks Thursday at an event hosted by the Atlanta Business Chronicle.

“That is why I believe we should allow events to continue to unfold before beginning the process of normalizing policy.”

“My outlook right now is for our first cut to be sometime in the third quarter this year, and we’ll just have to see how the data progress,” Bostic concluded.

This sent the odds of a March rate-cut lower still...



Source: Bloomberg

The Senate passed a stopgap funding bill to keep the government open, which prompted an immediate buying spree in stocks, lifting all the majors into the green (with Nasdaq notably outperforming and Dow and Small Caps the worst gainers)...



MAG7 stocks soared to a new record high



Source: Bloomberg

'Most Shorted' stocks ended lower again, despite the afternoon ramp...



Source: Bloomberg

That is the 8th straight day lower for 'most shorted' stocks to make it the worst start to a year for those stocks since 2016...



But, while stocks swung around wildly, Bitcoin was a one-way street lower after the ETFs opened... again...



Source: Bloomberg

...now back at its lowest since the start of December...



Source: Bloomberg

Ethereum has held its gains relative to Bitcoin since the ETFs launched...



Source: Bloomberg

Notably, Bitcoin ETFs have seen $1.25BN of net inflows since inception... and the price is down...



Source: Bloomberg

Yields continued to rise today, now all dramatically higher year-to-date with the long-end underperforming. On the day the long-end notably lagged (30Y +6bps, 2Y unch)...



Source: Bloomberg

The yield curve (2s30s) steepened back into dis-inversion...



Source: Bloomberg

In case you wondered, Stocks are at one-month highs... and so are bond yields...So bonds are unchanged since the FOMC but stocks are soaring...



Source: Bloomberg

The dollar ended the day unchanged, recovering overnight losses during the early US session...



Source: Bloomberg

Oil prices extended gains after today's inventory data with WTI pushing above $74, breaking out of its YTD range (next stop $71?)...



Source: Bloomberg

Spot Gold prices tested down towards $2000 today, before bouncing back above $2020...



Source: Bloomberg

Finally, we note that the frequency of Hindenberg Omens is increasing significantly...



Source: Bloomberg

"Probably nothing!"