Daily Stock Market Recap per ZH

Oil Soars In July As Massive Short-Squeeze Sends Stocks Up For 5th Month In A Row
MONDAY, JUL 31, 2023 - 04:00 PM

While the Chinese manufacturing economy continued its contraction overnight, July saw the 3rd straight month of upside economic data surprises in the US - now at its most positive since March 2021 - crushing talk of 'any'-landing at all...



Source: Bloomberg

Interesting, despite the surprising macro picture, rate-change expectations for the rest of the year were little changed MoM (albeit with a big dovish drop early on followed by a hawkish shift back to high-for-long by the end of the month)...



Source: Bloomberg

That 'good' news lifted stocks - all of them - on the month, with Dow Transports leading the month (along with Small Caps) and the S&P and Dow Industrials lagging (but still up 3% on the month). That's the 5th straight month of gains in a row - the longest win streak since Aug 2020 ...



Source: Bloomberg

The last couple of minutes of the month saw a mini-melt-up in stocks...



Energy stocks outperformed on the month (along with financials?) while Defensives (Healthcare and Real Estate) lagged...



Source: Bloomberg

Cyclicals only marginally outperformed Defensives on the month...



Source: Bloomberg

The gains were supported by another huge squeeze. 'Most Shorted' stocks accelerated higher in July by the most since Jan (the 3rd straight month of squeeze/covering - the biggest 3 month rally since March 2021)



Source: Bloomberg

The implied correlation embedded within S&P 500 options crashed to a record low in July (i.e. the index-level risk plunged relative to that of the idiosyncratic risk of all the components as traders sold index vol relative to single-stocks like there was no tomorrow)...



Source: Bloomberg

VIX went basically nowhere in July as stocks soared...



Source: Bloomberg

But this week could be fun...



Source: Bloomberg

Bonds were mixed in July with the short-end outperforming (2Y -7bps, 30Y +15bps)...



Source: Bloomberg

The 10Y yield tried (and failed) twice during the month to break above 4.00%...



Source: Bloomberg

Which meant the yield curve (2s30s) steepened significantly on the month - but only after it flattened to its most-inverted since SVB's collapse...



Source: Bloomberg

The dollar fell for the second straight month in July, but bounced back from an ugly intra-month low



Source: Bloomberg

Cryptos were very mixed on the month with BTC and ETH down around 4%, Solana and Ripple ripping higher and Litecoin flailing...



Source: Bloomberg

Perhaps most notably, Bitcoin volatility dropped to its lowest since 2016...



Source: Bloomberg

July was Oil's best month since Jan 2022, with WTI hitting $82, back above pre-OPEC-Cut levels from March/April...



Gold rallied in July - up around 3% for its best month since March with futures back above $2000...



Finally, as Goldman sums up the strong market performance ahead of the recent positive economic data as "Uncomfortably Long". Because the market has already taken meaningful credit for better growth and inflation news, the road ahead could be a little bumpier than in the last few weeks. US equities are the poster child for the tension between macro news and valuation.



Source: Bloomberg

Stocks do not look cheap, but there is little doubt that the macro news – higher growth, lower inflation – is a more equity-friendly mix than was expected. BUT For now, credit markets ain't buying it...



Source: Bloomberg

With Thursday and Friday being VERY event-risk-heavy, catalysts for some tactical pull-back to reality in stocks are high.

 

Banks, Bonds, & Bullion Battered As Dollar Rips To Start August
TUESDAY, AUG 01, 2023 - 04:00 PM

Yields surged higher today, despite dismal economic data, as supply (corporate and govt) dominated along with positive employment signals from the PMIs (although the JOLTs data was shitshow and should have trumped any positives from PMIs). The dollar also ripped higher... on a bad data day (to start the month) as PMIs were abysmal around the world (and non-USD fiat weakness means USD fiat strength).

Global Manufacturing PMIs and Global Stocks seem to be in disagreement...



Source: Bloomberg

"probably nothing..."

Equity markets were broadly under pressure today early on but the ubiquitous short-squeeze lifted them off the lows. The Dow ended higher



Another day, another short-squeeze...



Source: Bloomberg

It's now been 40 days since the S&P had a down 1% day...



Source: Bloomberg

And of course, bankrupt trucker Yellow was up over 150% today - hitting $5.00, its highest since Oct 2022 - massively higher from the 43c lows late-last week...



And WTF is this!!!!



Banks were dumped today...



Treasuries were clubbed like a baby seal during the European session and the selling pressure abated after Europe closed. The long-end notably underperformed...



Source: Bloomberg

Bloomberg's Alyce Andres offers 10 reasons why bond investors are so bearish today.

1. The US refunding projections for Wednesday are skewed higher after the Treasury increased borrowing estimates Monday
   
   
2. The technical break of 4% in 10s was meaningful and provided some momentum as yields retest recent highs ahead of the refunding announcement and Friday’s jobs report
   
   
3. Foreign real money sold 10-year futures contracts right out of the gates today in New York, while cash desks noted similar accounts exited longs in 5s
   
   
4. Relative-value accounts sold in both 5s and 20s against 2s
   
   
5. Financial-linked corporate bond issuance slowed today, lessening the need to receive in swaps
   
   
6. Month-end is out of the way -- lessening the need for indexing demand
   
   
7. With the adjustment in duration, investors are preparing for for convexity sales. Dealer desks say it has yet to materialize but easily could
   
   
8. Pressure also seen in mortgage-backed securities, with hedge fund sales due to the shift in duration. Weakness in MBS can often lend to hedging flows in Treasuries. Dealers report the recent money manager bid looks a bit tired in MBS
   
   
9. Commodity Trading Advisors and speculative accounts remain short and are willing to let those winning trades ride — feeling no pressure to unwind
   
   
10. Liquidity is low, exaggerating price action

10Y yields topped 4.00% and 30Y yields ripped up to their highest since Nov 2022...



Source: Bloomberg

The yield curve (2s30s) steepened notably today (less inverted)...



Source: Bloomberg

The dollar extended its rebound from mid-July's plunge (retracing almost 70% of the drop)...



Source: Bloomberg

We also note that The Dollar Index is closing in fast on key technical levels...



Source: Bloomberg

Bitcoin dumped and pumped back above $29k...



Source: Bloomberg

Gold tumbled back below $2000 today...



WTI hit $82 today, back at OPEC-Cut highs from April...



Finally, Mr.Biden may have a problem (well let's be honest, this is but one of many)...



Source: Bloomberg

Retail gas prices are set to explode (and that won't help the "inflation is defeated" narrative).

 

Banks, Bonds, Big-Tech, Black Gold, & Bullion Battered As Dollar Disregards Downgrade
WEDNESDAY, AUG 02, 2023 - 04:00 PM

A better than expected ADP print (hot), started yields rising but the Treasury refunding announcement (more supply) really cracked the bond market (no - it was NOT the Fitch downgrade!)



Source: Bloomberg

10Y Yields soared to their highest since Nov 2022...



Source: Bloomberg

Treasuries overall were mixed with the short-end actually lower in yield by the close (2Y -2bps) after an initial spike and long-end higher in yield (30Y +7bps) but well off its worst levels. On the week, 2Y is basically unch while the long bond is +15bps...



Source: Bloomberg

The yield curve (2s30s) steepened (dis-inverted) further - back near mid-July highs...



Source: Bloomberg

US Sovereign risk was completely unmoved by the nothingburger of the Fitch downgrade...



Source: Bloomberg

Although we would note that overall US Credit Risk is higher under Biden than Trump despite the so-called "Trump Downgrade"...



Source: Bloomberg

Stocks were down across the board (yes they fell on the downgrade headline) but a combination of strong jobs and heavy debt issuance could become a problem as rates soar and long-duration stocks (Nasdaq) were spanked hardest. The Dow was the prettiest horse in today's glue-factory, down around 1%...



The S&P's 47-day streak of days without a 1% loss is over



The Nasdaq 100 is now at its weakest relative to the Russell 2000 in 2 months...



The 'most shorted' stocks saw their biggest drop since March...



Source: Bloomberg

Banks broke down to two week lows...



AMD weakness dragged chipmakers lower with NVDA spanked...



...is this the high?



Source: Bloomberg

The dollar continued to rally, now erasing over Fib 76.4% of the mid-July plunge...



Source: Bloomberg

With the DXY Dollar Index closing above its 50- and 100-DMAs...



Source: Bloomberg

Bitcoin pumped and dumped today, surging higher overnight after the US downgrade to top $30k, and then legging lower on headlines about DoJ mulling fraud charges for crypto exchange Binance...



Source: Bloomberg

Oil prices puked today after rising overnight on the biggest crude draw in history. WTI ended back below $80 - around one week lows - with all sorts of explanations for why we sold off (chatter about slumping gasoline demand, and expectations for draws over the entire month of July being realized). It could just be positioning...



Gold tumbled AGAIN, with futures back at $1970 - near one-month lows...



Finally, as Goldman notes, as we head into the generally quieter summer period for markets, investors are debating whether it is safest to assume renewed risk-on momentum over the coming weeks or prepare for more meaningful downside on a possible disappointment in the data given the extent of optimism currently priced...



Simply put, US cyclical equities look vulnerable given the extent of growth optimism currently priced.

 

Bond Bloodbath Builds, Yield Curve Steepens, Black Gold Bounces Ahead Of Payrolls
THURSDAY, AUG 03, 2023 - 04:00 PM

Another day, another clubbing of bond bulls (and oil bears)...



Services surveys signaled 'stickier' inflation, jobless claims (and falling challenger job cuts YoY) confirmed labor market remains strong, and factory orders jumping all helped send Treasury yields to new cycle highs (and initially weighed on stocks before the ubiquitous wave of buying came back in).

Futures were slammed around the Asia-close-Europe-open and then again at the US cash open before bouncing back aggressively after the ISM data at 10ET. Once Europe closed, stocks faded to end in the red...



Will AMZN/AAPL mark the top?



Source: Bloomberg

Nasdaq has now been 'overbought' for 60 days - its longest period since the run-up to the bursting of the dot-com bubble...



As @MacroCharts noted, yesterday's sharp decline broke the S&P's longest low-Volatility streak in years. Many similar breaks ended with some big Volatility spikes & Stock declines.



VIX remains elevated but VVIX leaked a little lower today ahead of tomorrow's payrolls print (but VVIX is definitely still stressed)...



Source: Bloomberg

The recent acceleration in yields appears to have had an effect on long-duration risk-assets...



Source: Bloomberg

Treasuries were clubbed like a baby seal once again with the long-end the ugliest horse in today's glue factory (30Y +13bps, 2Y +2bps). On the week, 30Y Yields are up 30bps (2Y only +2bps)...



Source: Bloomberg

30Y yields are back up near last October's highs...



Source: Bloomberg

The 5s30s segment of the yield un-inverted today



Source: Bloomberg

Notably, long-end futs vol has picked up significantly while 10Y Futs vol has risen only modestly...



Source: Bloomberg

Interest-rate options traders are paying through the nose for protection against further increases in long-maturity Treasury yields that are already at their highest levels of the year.



Source: Bloomberg

The dollar ended the day flat, having retraced July's losses; perfectly round-tripping to the last payrolls print...



Source: Bloomberg

Oil soared back, erasing yesterday's decline after Saudis were reported as extending their 1m,m b/d production cut through September (and could "deepen" cuts)...



Gold and Bitcoin were noisy but quiet today, modestly lower and higher respectively...



Source: Bloomberg

Finally, as Goldman notes, investor sentiment has shifted further ahead of economic sentiment with PMIs weakening...



Additionally, we note that the relationship between bonds and stocks is at an extreme...



Source: Bloomberg

Will tomorrow's payrolls print break it bad?

 

Less Jobs, More Inflation: Stocks Puke, Oil Soars, Yield Curve Steepens
FRIDAY, AUG 04, 2023 - 04:00 PM

Less jobs, slower Services and Manufacturing sector growth, sticky prices (ISM), and surging gasoline costs (thank you OPEC) - Bidenomics smells more like stagflation.

'Hope' has been in charge of macro data recently with 'soft' survey data surging back in its mean-reverting manner as 'hard' real data has been fading (led down by industrial, personal finance, and housing data)...



Source: Bloomberg

After a bloodbath in bond-land this week, today's ugly jobs data sparked a bond-buying-panic (the belly outperformed today 5Y -15bps), sending yields at the shorter-end of the curve lower on the week (-10bps), though the long-end was still up around 20bps on the week...





Source: Bloomberg

No-one should be surprised by this purge in yields...

Rate-hike expectations tumbled...



Source: Bloomberg

On the stock side, AMZN and AAPL were the big movers (the former surging most since Nov as the latter tumbled by the most this year)...





Overall, they lost around $30 billion in market cap today...



Source: Bloomberg

That weighed on Nasdaq which was the week's worst performer - its worst week since March. The Dow managed a bounce today - perfectly tagging unch for the week - before it all fell apart...



It seems Goldman's Scott Rubner was on to something when he warned "fade the green" as stocks bounced this morning.

Options traders aggressively faded the bounce post-payrolls in stocks then they piled on as the S&P broke 4500...



Source: SpotGamma

The S&P plunged to 3-week lows...



None of which should have been a surprise given our warning.

'Most Shorted' stocks tumbled on the week - the first losing week in the last six...



Source: Bloomberg

VIX (and VVIX) were both higher on the week with significant volatility...



Source: Bloomberg

Back to bonds, the yield curve surged this week (2s30s steeper for the 9th straight day). Outside of the SVB collapse, the last two weeks have seen the biggest curve-steepening since April 2022...



Source: Bloomberg

Yields reversed at key resistance levels from last November (or March's SVB collapse)...



Source: Bloomberg

The dollar rallied for the 3rd straight week, though today's dovishness took some of the lipstick off. The reversal in the USD happened right at the pre-Payrolls dump level from July...



Source: Bloomberg

Crypto continues to tread water with BTC hovering around $29k (after tagging $30k intraday during the week)



Source: Bloomberg

Gold rallied on the day as the dollar sank but overall was lower for the second week in a row. Today's post-payrolls jump echoed last month's...



Oil prices surged to $83 (WTI) today after the OPEC+ panel's recc and are up for the sixth straight week (longest streak since June 2022)...



...with WTI at its highest since November...



Source: Bloomberg

Which is a very bad thing for those who believed The Fed has beaten inflation - Pump prices are about to explode...



Source: Bloomberg

And this time Biden is out of options with the SPR... maybe time for another fist-bump?

Finally, you are here...



Source: Bloomberg

And, as Goldman notes, companies that are beating consensus ests by >1SD are only outperforming the S&P 500 by +70bps on the trading session directly following earnings. Typically beats outperform the S&P 500 by over 100bps.



In other words, it's all priced-in.

 

Stocks Up, Gold Down As Yield Curve Steepens Further
MONDAY, AUG 07, 2023 - 04:00 PM

After the worst week in months, it's perhaps no surprise that we got a little BTFD today in stocks, but bonds kept doing more of the same - bear-steepening - the max-pain trade for markets right now. As Goldman noted this morning:

It's a trade that hurts real money both from a curve and level perspective.

The rates macro Hedge Fund community didn't have it on as it's still reeling from the March VaR shock.

It hurts anyone who had a conditional view, that is anyone in the bull steepening camp.

In 2022, we also saw a lot of banks move their mortgages into Held-to-Maturity portfolio as the Fed started hiking.

These moves will amplify the losses already accumulated.

Finally when you look at more recent MBS vintages, the negative convexity will be painful here. (Side note: older vintages have actually turned positive convexity so those MBSs should be much better off).

The only cohorts that seem to have the right trade are cross over accounts that hedged against higher rates and CTAs - trend following Hedge Funds - that were picking the carry by shorting the frontend and selling the backend.

2s30s is back at its least inverted since May...



Source: Bloomberg

The short-end of the curve and stocks benefited from NYFed's Williams dovish comments to NYT that the need for more rate hikes is “an open question,” ... And if the inflation rate keeps falling, the central bank may need to lower interest rates in 2024 or 2025 to ensure that real interest rates don’t rise further.

“Monetary policy is in a good place - we’ve got the policy where we need to be,” Williams said in an Aug. 2 interview with the New York Times that was published Monday.

“Whether we need to adjust it in terms of that peak rate - but also how long we need to keep a restrictive stance — is going to depend on the data.”

In equity-land, Small Caps were the day's laggard (ending around unch) while The Dow led the gains...



Notably, 0-DTE traders pushed back against the rebound in the S&P (buying Puts while Calls were flat)...



Source: SpotGamma

AAPL down for the 5th straight day - down around 10%, its biggest such drop since Nov 2022 (and back below the Jan 2022 prior record highs)...



TSN also tumbled but dip-buyers put some lipstick on that pig...



VIX (and VVIX) slid lower today (but remain elevated from last week's lows)...



Source: Bloomberg

But bear in mind, VIX seasonality is not an equity bull's friend...



US Treasuries were mixed today with the short-end outperforming and long-end sold (2Y unch vs 30Y +6bps)



Source: Bloomberg

The yield on 30-year German bonds rose nine basis points to 2.72%, the highest since early 2014...



Source: Bloomberg

The dollar ended basically unchanged on the day, selling off vs its fiat peers during the US session after overnight gains...



Source: Bloomberg

Bitcoin ended unchanged, bouncing back from morning weakness, back below $29,000...



Source: Bloomberg

Gold ended the day marginally lower, bouncing off pre-payrolls levels from Friday...



Oil also sank to pre-payrolls levels and bounced...



Finally, the rebound in Fed repo balances has stalled the Q2 meltup in stocks...



Source: Bloomberg

What happens next?

 

Quartet Of Carnage Crushes Stocks; Bonds, Bitcoin, & Black Gold Bid
TUESDAY, AUG 08, 2023 - 04:00 PM

Futures suffered a quartet of carnage into today's US open included a disappointing night of economically-sensitive EPS prints (UPS, CBT, CE, IFF); Chinese trade data bombed, with exports showing the worst decline (-14.5% YoY in July) since Feb 2020, while imports too were crunched (-12.4%) - reflecting weak domestic demand, and iterating ongoing issues with lack of consumption and investment growth in China; Italy's surprise windfall profits tax on banks has spooked EUR banks and broad index; and Moody's cuts 10 US banks (including “super regionals” Capital One, PNC Financial Services Group and Fifth Third Bancorp) on the increased cost of funding and office exposure.

But apart from that, everything is awesome in Bidenomics-land... as 'hope' leads ('soft' survey data rising as 'hard' economic data slides)...



Source: Bloomberg

FedSpeak was 'on message' - high(er) for long(er)...

0820ET *HARKER: FED MAY BE AT THE POINT WHERE IT CAN HOLD RATES STEADY, FED WILL NEED TO HOLD RATES STEADY FOR A WHILE

0855ET *FED'S BARKIN SAYS INFLATION REMAINS TOO HIGH

The result - all the US majors were in the red today. The equity indices were dumped at the US cash open then staged a recovery after Europe closed...Nasdaq was the biggest loser on the day...



After the gap-down open, a short-squeeze was engineered once again...



Source: Bloomberg

AAPL managed to bounce back into the green today, ending the 5-day losing streak. We note that AAPL found support tosay at its 100DMA (having broken below its 50-DMA last week)...



0-DTE traders faded the afternoon bounce in the market again...



Source: SpotGamma

Italian banks were clubbed like baby seals...



Source: Bloomberg

In the US, Regional banks puked on the downgrades but bounced back after a weak open...



VIX (and VVIX) pumped-and-dumped today, following a similar pattern to the last few days. VIX topped 18 intraday and VVIX remains "stressed" in the 90-100 range...



Source: Bloomberg

Treasury bonds were bid across the curve but the long-end outperformed (as the curve bull-flattened)...



Source: Bloomberg

10Y yields fell back below 4.00% intraday



Source: Bloomberg

The dollar rallied hard overnight - back up to June and July's Payroll print levels - before fading back.



Source: Bloomberg

Bitcoin ramped up towards $30,000 (again) today, after sitting around $29,000 for a week...



Source: Bloomberg

Another crazy day for crude with WTI dumping and pumping (back up to $83)...



Gold fell back to Friday's spike lows...



Finally, it does have the feeling that we are close to a 'sell the news' moment in the AI-bubble...



Can history really repeat?

 

Big-Tech, Banks, Bitcoin, & Bullion Breakdown Ahead Of CPI; Bonds Bid
WEDNESDAY, AUG 09, 2023 - 04:00 PM

China deflation, Italian authorities watering down bank-tax threats, and fears about the AI Boom's reality (SMCI's comments dragged down NVDA) were the headline narrative-shapers of the day... but all anyone cares about is the giant event risk mountain that tomorrow's CPI print represents.

Futures drifted gently higher overnight but started to stall into the open and then a wave of selling hit until the European close. That BTFD bounce lasted until 1430ET (margin-call time?) when The Dow and S&P briefly got back to even, and then stocks faded aggressively into the close



The Dow dropped to its 50DMA for the first time since early March...



Italian authorities appeared to chicken out and watered-down their bank windfall tax plans, which sent Italian bank stocks surging (but still down on the week)...



Source: Bloomberg

But US banks didn't bounce, ending lower again (Regionals)...



VVIX remains stressed ahead of tomorrow's CPI (although we saw a fade in VIX)...



Source: Bloomberg

Bonds were mixed on the day with 5Y and shorter higher in yields and anything beyond 5Y lower (30Y -4bps, 2Y +4bps)...



Source: Bloomberg

Strong 10Y auction dragged its yield back to 4.00%...



Source: Bloomberg

The dollar was flat on the day, holding around the pre-payrolls level...



Source: Bloomberg

The Ruble's recent collapse accelerated today and prompted the Bank of Russia to halt FX purchases until the end of 2023 (to prop up the Ruble)...



Source: Bloomberg



Gold dropped to its lowest close since March, heading back towards $1900 and $1893 support...



Source: Bloomberg

Oil prices broke out to new 2023 highs today, with WTI back above $84.50...



Source: Bloomberg

Finally, this just made us laugh and we pre-emptively apologize to those whose feelings are hurt. Goldman Sachs unveiled their so-called Obesity Index to track a basket of companies that are benefiting from the recent rage of GLP-1 agonist weight-loss drugs.



Source: Bloomberg

The Index ticker is GSHLCBMI - which we assume stands for Huge-Lardass-Chubby Body Mass Index - and it is outperforming.

But, there is something a little more serious happening with the AI Boom...NVDA is back at one-month lows, down over 12% from the highs in mid-July...



Source: Bloomberg

It's not really as easy as that is it?

 

Soft CPI, Sloppy Auction, & Sudden Iran Deal Spark Market Chaos
THURSDAY, AUG 10, 2023 - 04:00 PM

Well, that was a day.



Mixed inflation data (take your pick on core lower, headline lower, services still really high), higher initial claims (but it's all fraud) but 2023 lows for continuing claims, a sloppy 30Y auction, and rumors and confirmation of a oil-price-dropping deal with Iran to swap some prisoners for a few billion bucks.

But apart from that, a quiet illiquid summer day which saw oil pump-and-dump, bond yields drop-and-pop, stocks spike-and-puke, gold jump-and-slump, and the dollar purge-and-surge.

Let's start with stonks. The initial move after CPI was choppy but that quickly became a buying-panic (as it does). However, at around 1000ET, Goldman's Scott Rubner said "fade the green" and we plunged...



A little late-day relief helped the S&P back (barely) into the green...



0-DTE traders had been fading the post-CPI ramp from the start, fighting non-stop once the S&P broke above 4500 (and won)...



Source: SpotGamma

WeWork exploded higher (up over 125%) erasing the 'going concern' collapse...



NVDA continues its decline...right on schedule...



Source: Bloomberg

VIX was marginally lower on the day but VVIX remains in the 'danger zone' around 100...



Source: Bloomberg

Treasury yields ended higher on the day across the whole curve (2Y +1bp, 30Y +7bps) but that does not tell the full story as the swings were rather large. All yields are now higher on the week with the belly underperforming...



Source: Bloomberg

An ugly 30Y auction triggered broad-based selling in bonds (and a rip higher in the USDollar) at around 1300ET...



Source: Bloomberg

Rate-hike expectations dropped today with only a 10% chance of a Sept rate-hike now (and 20% odds of a Nov hike). There is now around 150bps of rate-cuts priced in to markets through the end of 2024...



Source: Bloomberg

The dollar ended higher on the day after plunging on CPI...



Source: Bloomberg

Dollar gains weighed on gold, which fell below $1950, round-tripping back to June lows



One can't help but wonder at the timing of the Iran prisoner-swap decision. With wholesale gasoline and crude prices soaring, the American public is about to be hit by another pocket-book-crushing surge in pump prices...



Source: Bloomberg

President Biden has emptied the SPR and the Saudis are no longer America's friend (in fact the opposite). So why not throw some cash to Iran and allow them to open up their spigots... It is working... for now... as oil prices tumbled...



Source: Bloomberg

Finally, core CPI slipped lower and there was much jubilation as President Biden continued to take a victory lap over 'inflation coming down'. Just one thing though: shit's still super expensive-er, yo!

If you are a human that likes to eat food (in the home or at a restaurant), it now costs you around 20% more than it did under President Trump...



Source: Bloomberg

It's not disinflation that the average-joe needs, it's DEFLATION (unless you're a UPS driver or UAW union member).

One last thing...we've seen this malarkey before...



So don't get too excited.

 

Bonds & Big-Tech Battered As Inflation Fears Trump Payrolls Hope
FRIDAY, AUG 11, 2023 - 04:00 PM

The trend of weaker 'hard' data and hope-filled 'soft' data stalled a little this week as the latter failed to improve...



Source: Bloomberg





But the big theme of the week was 'inflation' appearing to be stickier than many 'soft landing' narratives had accounted for which pushed Fed rate expectations higher on the week (erasing the dovish response to last week's payrolls)



Source: Bloomberg

For the first time since December, the Nasdaq is down for two straight weeks as the smell of fear wafts across the AI-bubble-buyers. The Dow managed gains on the week but S&P and Small Caps joined big tech in the red on the week...



NVDA was the big loser, down over 8% on the week (its biggest weekly loss since Sept 2022... right on schedule...



Source: Bloomberg

'Most Shorted' stocks tumbled for the 2nd straight week, as all squeeze attempts were foiled by selling pressure as the index shifted to negative gamma. In fact, the most-shorted basket is down for 8 of the last 9 days...



Source: Bloomberg

SpotGamma's Gamma Tilt index is decidedly negative...



A chaotic week across markets left VIX lower but VVIX still in the danger zone around 100...



Source: Bloomberg

Treasury yields were up across the curve with the bally underperforming...



Source: Bloomberg

However, extending that a little, we see that bonds have basically roundtripped from before last Friday's payrolls



Source: Bloomberg

The dollar ended higher on the week, as CPI/PPI sparked USD-buying, erasing the post-payrolls drop...



Source: Bloomberg

Crypto was relatively quiet once again with Bitcoin chopping around the $29-30k range. Solana outperformed...



Source: Bloomberg

Gold and Silver were the week's biggest losers in commodity-land as NatGas soared. Crude was flat and copper slightly lower...



Source: Bloomberg

Finally, we noted that spec positioning on US equity futures vs. intermediate sector UST futures is about to take out all time highs...



...and US equities are excitedly divergent from Fed bank reserves...



What could possibly go wrong?

 

Big-Tech Bounces; Bonds, Bitcoin, & Black Gold Struggle As Rate-Hike Odds Rise
MONDAY, AUG 14, 2023 - 04:00 PM

A quiet day on the macro-front removed headline risk and allowed the algos to play on a very technical-feeling day.

• NVDA rebounded above its 50DMA
  
  
• Russell 2000 found support at 50DMA
  
  
• Nasdaq rallied back up to its 50DMA
  
  
• USD Index rallied up to its 200DMA
  
  
• Gold fell to its 200DMA

Notably, rate-hike expectations extended their hawkish shift today, erasing all of the dovish-response to payrolls...



Source: Bloomberg

Futures were ugly overnight until hopes of China stimulus sparked a brief buying panic at the end of the Asia session / open of European session. That did not hold well and selling pressure began early in the US session. The cash open sparked Small Caps selling, big-tech-buying but at around 1000ET, 0-DTE traders began to aggressively fade the rally but the S&P held its gains...



Source: SpotGamma

Small Caps ended the day's biggest loser and The Dow was red and barely better. Nasdaq took al the glory with the S&P far behind but green...



Small Caps bounced perfectly off their 50DMA. Nasdaq rallied back up to its 50DMA...



NVDA opened lower, testing its trillion-dollar-market-cap, but then a wave of buying emerged as a major 0-DTE gamma squeeze swept into the AI-Angel...



Source: SpotGamma

...and lifted it back above its 50DMA...



The timing of the NVDA bounce is right on cue...



Source: Bloomberg

'X' marked the spot of acquisition exuberance today - up 40% as it appears in play...



Amid a choppy day, Treasuries were sold across the curve today with the short-end significantly underperforming (2Y +7bps, 30Y +2bps). We note the period from the US open to EU close saw buying...



Source: Bloomberg

2Y yields rose for the 4th straight day, erasing the payrolls puke in yields and back up toward 5.00%...



Source: Bloomberg

10Y Yield hits highest since Nov '22...



Source: Bloomberg

Dollar Index rallied further, pushing above its 200DMA...



Source: Bloomberg

But it could not hold the 200DMA intraday...



Source: Bloomberg

China's offshore yuan tumbled to Nov '22 lows as the nation's struggling economy prompts capital outflows...



Source: Bloomberg

Russia's Ruble continued its rout as the country's current account surplus tumbled 85% from a year ago. But then it stalled after headlines about an 'extraordinary' key rate meeting...



Source: Bloomberg

Gold fell to its 200DMA...



Source: Bloomberg

Finding support just above $1900 at the 200DMA intraday...



Source: Bloomberg

Oil prices clipped lower on the day - after trying to back to even multiple times...



Finally, there remains an alternative...



Source: Bloomberg

6-mo bills yield 94bps more than the S&P's earnings yield... do you feel lucky?

 

Banks, Big-Tech, Bitcoin & Black Gold Breakdown As Beijing Barfs, Builders' Belief Busts
TUESDAY, AUG 15, 2023 - 04:00 PM

In a surprise overnight, China cut rates to pre-emptively distract from the pig-ugly China macro data (everything missed). That weakness trumped a surge in Japanese GDP (which itself hid problems with domestic spending) and then US retail sales beat, while homebuilder sentiment disappointed. In other words, decoupling...



Source: Bloomberg

But in the US, strength in the Retail Sales Control Group lifted GDPNOW - The Atlanta Fed's best-guess at this quarter's GDP growth - soaring above 5% today (after China's shitshow of macro data overnight, but Japan's renaissance)...



Source: Bloomberg

Doesn't exactly reinforce the case for a Fed pause - in fact this kind of growth bolsters the case for hawkish-for-longer monetary policy, which would weigh on equities and bonds. Rate-hike expectations are nudging hawkishly higher...



Source: Bloomberg

The expectation for rate-cuts next year is also shifting hawkishly...



Source: Bloomberg

However, homebuilder confidence took a kicking today (first drop this year) as reality set in that mortgage rates aren't going down anytime soon...



Source: Bloomberg

...and after a squeezey day yesterday, the market's negative gamma re-awakened and the US majors were all clubbed like a baby seal with some notable weakness in the last hour...



Some are suggesting the late day weakness was impacted by the fact that Fidelity clients were offline...

S&P bounced off its 50DMA early on but was unable to hold it. Small Caps and Nasdaq also closed back below their 50DMA...



All the S&P sectors were red led by Energy and Financials but big-tech tumbled late on...



Source: Bloomberg

Banks were battered on more chatter of ratings downgrades (this time from Fitch)



Homebuilders refuse let the dream go - even as the floor disappears below their reality...



Source: Bloomberg

Bonds were mixed today with the short-end outperforming (2Y -2bps, 30Y +3bps)...



Source: Bloomberg

Bitcoin saw yet another puke...



Source: Bloomberg

The dollar rallied once again, holding gains at its highest close since June...



Source: Bloomberg

China's offshore yuan weakened to Nov lows against the dollar...



Source: Bloomberg

Gold fell for the 9th day of the last 10, testing down to its 200DMA...



We do note that gold found support at its 200DMA...



Oil prices slipped once again, not helped by China's data throwing doubt on demand...



Finally, there's no way it can happen again, right?



Could Jackson-Hole be the catalyst?

 

Stocks, Bonds, & Commodities Crumble As Dollar Rips On Hawkish Fed Minutes
WEDNESDAY, AUG 16, 2023 - 04:00 PM

Better than expected industrial production and a bigger than expected rise in housing starts lifted the Atlanta Fed's GDPNOW forecast for Q3 growth to 5.8% (but the St.Louis Fed's GDPNOWCast is not at all impressed)...



Source: Bloomberg

Is that what The Fed is hoping for from its tightening? While September odds were unchanged today, the market's expectations for year-end are hawkishly on the rise...



Source: Bloomberg

The Fed's Minutes were decidedly hawkish (with the most hawkish sentences since January according to Bloomberg's NLP model)...



Source: Bloomberg

And that weighed on everything with stocks, bonds, and commodities lower while the dollar rallied.

Nasdaq and Small Caps were the day's biggest laggards but all the US majors were ugly with the market's negative gamma very evident into the close...



The Nasdaq 100 broke below 15,000 to its lowest since June (almost 7% off the highs)...



The S&P, Nasdaq, and Russell 2000 all closed below their 50DMAs (The Dow remains above its)...



Cyclicals continued to underperform Defensives as the 'overshoot' in growth expectations is reversing fast (but has a long way to go)...



Source: Bloomberg

Regional bank stocks extended their recent losses...



Is it catch down time for stocks to credit...



Source: Bloomberg

Treasury yields were higher on the day across the curve with the longer-end underperforming (2Y +2bps, 10Y +6bps)...



Source: Bloomberg

The 30Y Yield closed at its highest since Oct '22...



Source: Bloomberg

The 2Y yield pushed up towards 5.00% today...



Source: Bloomberg

The dollar extended its recent gains today (the 5th straight day higher) to its highest close since May 2023...



Source: Bloomberg

Bitcoin puked back below $29k intraday but found support and got back above...



Source: Bloomberg

Oil (WTI) fell back below $80 to two-week lows, but remains well off the June lows...



Gold (spot) broke below $1900 to its lowest close since March....



Source: Bloomberg

Finally, NVDA bounced (as expected) and stalled today (as expected)... what's next?



And September is coming...



The median return for S&P since 1928 is -1.56%, September is the worst month of the year.

 

Bonds, Stocks, Bitcoin, & Bullion Battered As Yuan & The Yield-Curve Rally
THURSDAY, AUG 17, 2023 - 04:00 PM

An ugly JGB auction overnight was trumped by yuan intervention overnight saw futures drift higher into the US open...

Yuan rallied after 5 straight down days...



Source: Bloomberg

Domestically, WMT beat (but cautious commentary), initial jobless claims fell, Philly Fed Manufacturing surged, but LEI was a shitshow for the 16th month in a row. However, the 'good' news dominated and Fed rate expectations rose hawkishly...



Source: Bloomberg

...which weighed on stocks. Small Caps and Nasdaq led the charge lower but everything was a one-way waterfall in the afternoon...



Once Europe was closed, the algos were in charge with 0-DTE traders running the show as a negative gamma accelerated the waterfall lower...



Source: SpotGamma

The Dow joined the S&P, Nasdaq, and Small Caps in closing below its 50DMA. Dow was last below its 50DMA in June. Small Caps are getting close to their 100- and 200-DMAs. The S&P closed below the key 4,400 level...



'Most Shorted' stocks are down for 12 of the last 13 days...[Pro subs would have know that was the day that the top was in]



Source: Bloomberg

Implied correlation bounced - just like we said it would - right off those 2017/18 lows...



Source: Bloomberg

Regional bank stocks were down again today, back at the kneejerk lows from the SVB puke...



Bonds and stocks are tanking together (we explained why here)... Are Chinese banks selling USTs to 'fund' their yuan intervention?



Source: Bloomberg

Treasury yields were mixed with the short-end outperforming (2Y -2bps, 30Y +5bps). On the week, the short-end is notably decoupled from the rest of the curve...



Source: Bloomberg

Which saw the yield curve steepen (dis-invert) further...



Source: Bloomberg

Some worry that USTs are being sold to fund yuan intervention...



Source: Bloomberg

The dollar was unchanged today - recovering its yuan-intervention-losses overnight...



Source: Bloomberg

...but is holding above its 200DMA...



Source: Bloomberg

Bitcoin was clubbed like a baby seal, back below $28,000...



Source: Bloomberg

But if you are in Argentina, Bitcoin just exploded to a new record high after the recent primary...



Gold continued to slide lower (spot below $1900). If you squint you can see an intraday pattern around the London Fix...



Amid all that selling, we note that oil prices rallied, with WTI back above $80...



Finally, none of today's waterfall-like move in stocks should have been a surprise as we warned about fragility due to 'negative market gamma'...



...and CTA thresholds crossed...



We wonder if NVDA's earnings next week will be the catalyst?



Source: Bloomberg

A little bounce after tomorrow's OpEx and then (will J-Hole puncture the bubble)...



Source: Bloomberg

Would that be the real pain trade?

 

Worst Week For Stocks Since Banking Crisis; Bonds, Bitcoin, & Bullion Battered
FRIDAY, AUG 18, 2023 - 04:00 PM

Aggressive interventions by Chinese authorities were a notable theme on the week (strong-arming funds not to sell stocks, tapping banks on the shoulder to buy yuan against the dollar, and making firms an offer they can't refuse with regard share buybacks). However, Chinese stocks closed lower...



Source: Bloomberg

..and so did the offshore yuan...



Source: Bloomberg

So Mission Unaccomplished Beijing.

Interestingly, Goldman traders suggest that:

"to this point in the sequence, I’d argue the slowdown in China had been a net positive for US equities... with specific regard to the disinflationary impulse and the flow of capital...

...that said, coming out of a week that featured another disappointing set of data... and another dose of CNH weakness...

...it now feels like China growth fears can provoke a more global risk-off dynamic"

But, bear in mind that while the yuan has been spanked like a monkey against the dollar, it has actually rallied against the rest of its trading partners' currencies...



Source: Bloomberg

And while Chinese data was a shitshow, US macro (hard and soft) surprised to the upside this week...



Source: Bloomberg

Which, combined with relatively hawkish Fed Minutes pushed rate expectations higher on the week (reducing expectation for cuts next year also)...



Source: Bloomberg

This prompted 'risk-off' as the S&P fell for the 3rd straight week, its longest weekly losing streak since Feb, and suffered its biggest weekly loss since the collapse of SVB in March. Small Caps were the ugliest horse in the glue factory...



All of the US Majors closed below their 50DMAs (note in upper right that Small Caps dropped to 100DMA and bounced)...



Regional bank stocks fell for the 3rd straight week...



The put/call ratio surged up to the highest since the SVB collapse...



Source: Bloomberg

Most notably it appears the $2.2 trillion OpEx was put-monetization day for all options players (including 0-DTEs)...



Source: SpotGamma

Treasury yields were all higher on the week with the long-end notably underperforming (30Y +12bps, 2Y +4bps)...



Source: Bloomberg

Which steepened (dis-inverted) the yield curve (2s10s) further (remember its the resteepening that is the real peril)...



Source: Bloomberg

Also of note is that the 2Y Yield ripped up to 5.00% once again... and failed...



Source: Bloomberg

The dollar rallied for the 5th straight week to its highest since early June, breaking back above its 200DMA....



Source: Bloomberg

Crypto was clubbed like a baby seal this week with three big legs lower...



Source: Bloomberg

Bitcoin plunged back to pre-BlackRock ETF headlines...



Source: Bloomberg

The intraday pattern of overnight strength and post-London-Fix weakness continued every day this week in Gold. Spot Gold is back below $1900...



Source: Bloomberg

Oil prices fell on the week - the first weekly loss since June - with WTI finding some support at $80...



Finally, next week brings NVDA's "guidance heard around the world" on Wednesday and Jay Powell's Jackson Hole speech on Friday, both of which could catalyze major moves in the market.

The S&P volatility term structure is starting to fear it...



Source: Bloomberg

And NVDA bulls 'smell the fear'...



Source: Bloomberg

But could Powell really push us off the cliff?



Source: Bloomberg

Of course not, we have Bidenomics (oh, talking of which, there's always the chance that the govt shuts down in a week or two - that would slow the flow of money).

 

Soaring Tech Stocks Shrug Off Sky-Rocketing Treasury Yields... For Now
MONDAY, AUG 21, 2023 - 04:00 PM

No US macro today but China's disappointingly smaller-than-expected cut to the one-year prime lending rate, confused markets and traders after last week's unexpected rate cut.

Europe saw sentiment suddenly improve (for no good reason).

One thing of note was Jason Furman and Paul Krugman both pushing for The Fed to raise its inflation target (an arguably bullish - less higher for longer - policy shift). Who could have seen that coming...



Interestingly though, market expectations for The Fed continued to drift hawkishly...



Source: Bloomberg

...and then the US cash open - juiced by several NVDA upgrades - saw growth explode higher relative to growth... and keep going.

Today was the biggest 'growth' outperformance of 'value' since March 2023...



Source: Bloomberg

NVDA rallied back near recent record highs - ripping 7.5% on the day - after getting three more upgrades (BMO upped Px target from $450 to $550/share, KeyBanc raise to $620 from $550; HSBC raises to $780). This was NVDA's best day since the earnings-day surge in May...



The options-tail wagged the NVDA dog's body today with what looks like a 'gamma squeeze' engineering a constant bid. However, we do note that options traders were also buyers of puts in modest size...



Source: SpotGamma

Bear in mind that this bounce is 'right on cue'...



Source: Bloomberg

All of which meant that Nasdaq outperformed dramatically. Dow and Small Caps lagged with the S&P managing decent gains...



Interestingly, UBS traders noted that:

The desk continues to see outflows in Mega Cap Tech (excluding Nvidia and Microsoft) into strength today as investors worry that Tech is broadly overvalued.

Nvidia has taken a recent leg higher on renewed faith that company beats on Wednesday's print, driven by Data Center revenue.

Positioning is max long though the desk is not yet seeing investors cutting there or in Meta.

0-DTE traders pushed the market lower into lunch then tried to fade the bounce... and failed. Which led to 0-DTE call-buyers (not put unwinds) sending stocks soaring...



Source: SpotGamma

While VIX fell back below 17 today (and vol of vol collapsed)...



Source: Bloomberg

...traders remain anxious in the short-term for this week's 'events' - NVDA on Weds night and Powell at Jackson Hole Friday morning...



Source: Bloomberg

Nasdaq completely decoupled from bond yields today...



Source: Bloomberg

Bonds were sold across the whole curve today with the longer-end lagging (10Y +8bps, 2Y +5bps). Most of the selling pressure occurred between the US open and European close but we also note selling at China's open and China's post-lunch open (selling TSYs for USDs to buy yuan?)



Source: Bloomberg

The 2Y Yield ripped right back up to 5.00% but failed to break it - on 3 attempts...



Source: Bloomberg

10Y Treasury yields broke above the Oct '22 highs, back to its highest yield since Oct 2007...



Source: Bloomberg

Real rates (10Y) hit 2.00% for the first time since March 2009...



Source: Bloomberg

And growth stocks have completely decoupled from real yields...



Source: Bloomberg

And the S&P 500 is trading 5 turns too rich compared to real yields...



Source: Bloomberg

The dollar went nowhere on the day.

Crypto was modestly lower but no major pukes.

Oil prices fell, with WTI finding support at $80...



Gold tried - and failed - to get back up to $1900 (spot)...



Finally, the last time 10Y yields were this far above dividend yields was sept/oct 2007 - BNP Paribas funds liquidate, Fed slashes rates, market peaks...



Source: Bloomberg

It's different this time though.

 

BJ's Blows It & Dick's Shrink: Consumer Concerns Spook Stocks, Flattens Yield-Curve
TUESDAY, AUG 22, 2023 - 04:00 PM

With all eyes on NVDA's earnings tomorrow, today saw retailers and banks suffer (earnings in the former raising questions about America's "strong consumer", and S&P downgrades banks amid "tough" climate), as Philly Fed Services and Existing Home Sales disappoint on the macro side.

Retailers tumbled the most since May today as Macy's saw credit card losses rising faster than expected, Lowe's saw DIY discretionary spend decline, Dick's suffered serious shrink (organized theft), and while big box retailer's BJ's did not indicate any major credit card concerns, it did lower guidance by 1.5% as same-store sales came in light...

The S&P Retail sector fell to two-month lows...



Nike dropped for its 9th straight day to its lowest since Nov '22 - its longest losing streak in history...



Banks - big and small - suffered on the day with Regional banks down almost 3% to 6 week lows after S&P's downgrade...



Schwab tumbled for its 11th straight day, the longest losing streak since 2004...



Meanwhile, the AI boom may be showing cracks.

NVDA rallied in the pre-market up to record highs, ran those stops, and then tumbled for the rest of the day...



The timing is good..."you are here"



Source: Bloomberg

The basket of 'Most Shorted' stocks tumbled in to a bear market today, down 21% from its July 31st peak...



Source: Bloomberg

All of which sparked some chaotic price action in the majors with The Dow lagging and Nasdaq battling for green all day. The European session saw the big gains today as selling started early in the US session and continued through lunch...



0-DTE traders fought the downtrend in NVDA all day (heavy call-buying trying to spark a 'gamma squeeze')...



Source: SpotGamma

VIX was down on the day vol-of-vol (VVIX) tumbled...



Source: Bloomberg

Treasuries were mixed today with the short-end lagging (2Y +3.5bps, 30Y -4bps). On the week, yields are still higher with 30Y the least ugly horse in that glue factory...



Source: Bloomberg

Which dramatically flattened (inverted deeper) the yield curve (2s30s)...



Source: Bloomberg

Interestingly, amid the 'weakness' - retailers, consumer, housing, banks - the market's expectations for Fed rates actually continued its hawkish shift higher...



Source: Bloomberg

The dollar was practically unchanged on the day with Asian session weakness erased during the European session...



Source: Bloomberg

Crypto was chaotic today with some wild swing in Bitcoin around $26,000...



Source: Bloomberg

Oil prices limped lower again ahead of tonight's API inventory data with WTI back below $80...



Spot Gold tried (and failed again) to top $1900



Source: Bloomberg

UBS warns that its CTA model is now short gold and remains long oil (noting that gold short position could accumulate quickly next week):

Gold saw its fourth consecutive down week and it was enough for our model to initiate a short position after remaining neutral since early July due to a prevailing positive trend strength.

The Gold short is set to grow under all projected price paths next week.

The Oil long continued to grow last week, but the growth is projected to slow, even on a bullish path, or get stopped out on a bearish path.

Our CTA model is projected to sell both Copper and all three Soybean underlying assets next week.

Finally, VIX seasonality is starting to hot up...



Pray to the gods of AI or else...



Probably nothing...

 

Bonds, Bitcoin, Big-Tech, & Bullion Soar As 'Bad News' Is Good News Again
WEDNESDAY, AUG 23, 2023 - 04:00 PM

It's been an ugly couple of days for micro- and macro- data in the US (and globally) as retailers signal a far more-stressed American consumer than the market would like to believe, and global PMIs scream stagflation with 'sticky' prices rebounding as new orders tumble and the false optimism of the Services sectors' rebounds evaporates in a red mist of reality.

This week has seen the biggest set of 'bad news' since April...



Source: Bloomberg

And that bad news prompted a very aggressive bid for global bonds with USTs tumbling 8-12bps on the day, leaving the long-end down 9bps on the week (but 2Y +2bps still)



Source: Bloomberg

And in true US equity market fashion, that 'bad news' bid for bonds is 'good news' for long-duration stocks and we saw Nasdaq dramatically outperforming on the day (although all the majors were green today ahead of NVDA's earnings). Some late-day profit-taking wiped some of the lipstick off with The Dow lagging...



The bad news prompted a dovish drop in the market's Fed rate expectations, erasing the week's hawkish drift...



Source: Bloomberg

And for those hoping for a hawkish Powell deja vu all over again, we note that financial conditions have actually been tightening in recent weeks both mechanically...



Source: Bloomberg

...and anecdotally with SLOOS showing tighter credit conditions, home mortgage applications collapsing to 1995 lows, Dallas Fed banking conditions significantly tighter, and Macy's et al. commenting on surging credit card delinquencies.

The dollar dived on the dovish 'bad news' bias (after surging in the European session on weaker Euro)...



Source: Bloomberg

...which sent gold spiking back above $1900 (Spot)...



Source: Bloomberg

..and helped support crypto with Bitcoin bouncing back above $26,000...



Source: Bloomberg

The yield curve (2s30s) inverted deeper today, flattening back to last week's lows...



Source: Bloomberg

...as the 2Y Yield tried to get back above 5.00% but failed notably...



Source: Bloomberg

Oil slipped lower on the PMIs signaling demand fears - although WTI did bounce off one-month lows...



Peloton was puked hard to a record low as Americans prefer the Ozempic shortcut to fat loss...



Foot Locker stunk - suffering its worst day ever as the stock fell to its lowest since 2010 (and along wioth it all of Cramer's club members capital)...



Nike down for the 10th day in a row - its longest losing streak ever - falling to its lowest since Nov 2022...



Finally, NVDA bounced back to Monday's lows - teetering on the brink ahead of earnings tonight...



0-DTE call-buyers provided the floor for NVDA today



Let's hope this analogy finally snaps...



Because Nasdaq's Advance/Decline line just hit a record low...



Go Jensen.

 

Stocks Plunge, Nvidia Closes Barely Green As Markets Sell The News
THURSDAY, AUG 24, 2023 - 04:12 PM

It was the definition of selling the news (and pre-positioning for another Powell punch below the market belt).

After what many said was the biggest blowout in corporate earnings history, when Nvidia not only smashed estimates but projected Q3 results that were above the highest whisper number, the stock initially soared in the premarket, only to slump and completely fill the earnings gap, before closing up 0.1% having earlier traded as much as 10% higher.



The broader market tracked NVDA's slump tick for tick, and after an early attempt to push to fresh highs, a burst of selling quickly dragged spoos to session lows...



... with virtually all sectors (except banks) dragged kicking and screaming into the red.



Which is hardly a surprise in a market when just a handful of stocks are again leading the entire market: yes, the breadth on the Nasdaq is the lowest it has ever been.



Option traders did their best to keep the market from sinking, with delta sinking far more slowly than overall risk, at both the shorter-term, 0DTE time horizon...


Source: Spotgamma
... and across longer-dated options...


Source: Spotgamma
... but in the end, the selling just proved to powerful for a delta reversal or an attempted gamma squeeze.

While NVDA did its best to keep stocks in the green, other names did not, with woke Disney extending its recent rout, and tumbling to the lowest closing price since 2014 (March 18, 2020 saw a lower intraday print but even the covid low closes were higher than today).



Meanwhile, another woke icon (which pretends it doesn't use child labor), Nike, suffered its 11th consecutive day of declines, extending the longest stretch without a green close on record.



And in a testament to US consumer weakness, not even the retail outlet for increasingly more Americans who keep drowning under Bidenomics, could hold its own and Dollar Tree plunged 13% to close at the lowest level since Dec 2021.



In addition to the micro considerations, we also had a continuation of systematic factors, and as futures tumbled below the key support level of 4,400 and triggered renewed systematic/CTA/vol-control selling as confirmed by the massive Market on Close sell imbalance to the tune of $3.5 billion, macro was also in the picture, with the Citi eco surprise index posting a modest rebound after suffering the biggest set of "bad news" since April, and rising modestly on today's stronger than expected Initial Claims and Durables reports...



... which in turn triggered a rebound in yields after their sharp drop on Wednesday...



... and sent the 2Y yield back over 5% again.



And speaking of yoyo-ing rates, tomorrow's Jackson Hole meeting (previewed extensively here) was certainly on investors' minds, especially since we saw some easing in recent days, although within a range that hasn't really budged much in the past years, despite Powell's explicit warning one year ago that pain is coming...



... which so far it has failed to make an appearance.

Angst over what the Fed chair will say has also sent the dollar sharply higher, reversing all of yesterday's big drop, and continuing the range trade seen in the past week.



Despite the bounce in the dollar, oil managed to eek out tiny gains, and remains in the middle of the past month's range; where it goes next will depend on what, if any, stimulus China will release next.



Finally, while the BRICs did not reveal a gold-backed currency despite some speculation ahead of the meeting (which has added 6 new countries to the famous acronym), gold held yesterday's gain, with silver going even better.



So with that in mind ahead of Powell's speech tomorrow, we say: "Go Jerome" and let's hope you get it right this time.

 

Hawkish Powell & Horrible Data Spark Yield Curve & Crude Pain As Gold & Nasdaq Gain
FRIDAY, AUG 25, 2023 - 04:00 PM

From a macro perspective, "bad data" dominated the week with the Citi macro surprise index tumbling most since April...



Source: Bloomberg

From a micro perspective, it was all about retailers (consumer credit challenges and shrink) and NVDA (keeping the dream alive for the AI bubble). Retail stock ended the week lower and while NVDA exploded higher on the earnings news, it collapsed back in the last two days, down over 10% from its highs...



Source: Bloomberg

Of course, Fed Chair Powell's address today was a key event, but as Bloomberg's Cameron Crise notes, while it was tilted hawkish, it really said nothing new...

The “TL;DR” summary of Jerome Powell’s speech more or less boils down to “we’ll hike again if we need to but won’t if we don’t.”

That’s not exactly ground-breaking stuff, which is one reason that the market response has been fairly muted relative to the anticipation of this speech.

Interestingly, despite the bad data, anticipation of Powell's speech - and his actual speech - sent a hawkish shiver through short-term rate expectations (with a 25% chance now of a Sept hike and a 45% chance of a Nov hike)...



Source: Bloomberg

This is what that looks like for the curve...



Source: Bloomberg

Treasuries were very mixed this week with the long-end dramatically outperforming (2Y +10bps, 30Y -10bps)...



Source: Bloomberg

Which means the yield curve flattened dramatically, inverting deeper (back towards the July FOMC meeting reversal)...



Source: Bloomberg

The 2Y Yield surged back above 5.00%, rising to the July highs and reversing modestly...



Source: Bloomberg

Equities were also mixed with Nasdaq outperforming (along with the S&P) while The Dow was the ugliest horse in the glue factory, ending lower on the week with Small Caps down on the week...



The dollar ended the week marginally higher, bouncing back from Wednesdays plunge...



Source: Bloomberg

Crypto was volatile and mixed but while Ripple rallied and Solana sold off, Bitcoin and Ethereum ended the week practically unchanged...



Source: Bloomberg

Bitcoin glued around $26,000...



Source: Bloomberg

Spot Gold scrambled back above $1900, and held it even with today's post-Powell puke...



Source: Bloomberg

Oil dropped on Powell's speech (demand fears) and then accelerated lower on a Tansim tweet detailing the US-Iran deal (supply fears)... and then ripped bck into the green as everyone realized this is not new news.



And this is probably nothing...

However, overall, WTI was lower on the week, but managed to get back above $80 by today's close...



Finally, what happens next?



Source: Bloomberg

Could it really?