Daily Stock Market Recap per ZH

Bonds & The Buck Quiet, Stocks Squeeze Higher As Event-Risk-Heavy Week Looms
MONDAY, AUG 28, 2023 - 04:00 PM

A quiet day for macro - ahead of a week chock full of 'event risk' signals from PCE to ISM to NFP - was dominated early on by China's 5th try-and-fail to ignite some momentum in its stock market...



Source Bloomberg

That, as well as the new negative gamma regime (see below) prompted a giant short-squeeze at the cash open (but note no follow-through)...



Source Bloomberg

And despite the opening mess, all the majors ended the day higher with Small Caps leading the charge...



The S&P stalled 4 times at a critical CTA level (4447)...



That late-day surge was the biggest buy-program since July 27th...



Source Bloomberg

NVDA was ugly early on but we suspect the buybacks stepped in and lifted the AI angel back to pre-earnings spike resistance...



Treasuries were mixed with the long-end underperforming. All but the 30Y yield (unch) were down today. NOTE, Treasuries were bid during the Asia session and then bid again during the early US session...



Source Bloomberg

The 2Y yield fell back to pre-Powell levels today, but remains above 5.00%...



Source Bloomberg

The dollar traded in a very narrow range all day ending unch...



Source Bloomberg

Bitcoin rallied back above $26k early but then puked back below as the equity market closed...



Source Bloomberg

Gold (spot) rallied back above $1925 today - 3 week highs...



Oil prices were also higher on the day with WTI managing to get back above $80...



Finally, as SpotGamma notes, we entered into a negative gamma regime earlier this month and remain there. The expected result of this is a relatively wider range of price action, but also daily trends that tend to continue more often in one direction without retracing.



Source: SpotGamma

The market can be more difficult to read when market gamma is negative. This is partly because the occasional faceripping rally tends to bring it right back up to its resistance points, and testing into neutral territory. However, with key levels dropping, a structural path keeps reopening itself for the market to sneak down over time.

 

Markets JOLTed
TUESDAY, AUG 29, 2023 - 04:00 PM

No-good, terrible, bad news about the US labor market (coupled with a tumble in consumer confidence and uptick in inflation expectations) sparked chaos across multiple asset-classes today.



US Macro data has disappointed for 8 straight days, its biggest serial disappointment since June 2022...



Source: Bloomberg

The bad news sent the market's expectations for Fed rate changes dramatically (dovishly) lower, erasing all of the post-Powell hawkish shift...



Source: Bloomberg

Stocks were already lifting at the cash open, then ripped higher after the dismal jobs data with long-duration equities outperforming...



The decline in real yields supported a higher valuation for stocks...



Source: Bloomberg

The S&P 500, Nasdaq, and Dow all managed to close back above their 50DMAs...



'Most Shorted' stocks squeezed higher - the biggest surge in a month...



Source: Bloomberg

0-DTE traders faded the early gains (and covered) and then faded the rally in the S&P after Europe closed (and covered)...



Source: SpotGamma

NVDA did its thing, surging back above pre-earnings close highs (topping $490) before sliding back





Bonds were aggressively bid with the short-end outperforming...



Source: Bloomberg

2Y Yields tumbled back below 5.00%...



Source: Bloomberg

...and the yield curve (2s30s) steepened significantly...



Source: Bloomberg

The dollar puked today, its biggest daily drop since mid-July...



Source: Bloomberg

Bitcoin started to rally when the dollar fell and then exploded higher (topping $28,000) on the SEC loss in court...



Source: Bloomberg

Spot Gold spiked around 1%, its best day since mid-July, nearing $1940...



Source: Bloomberg

Oil prices rallied ahead of tonight's API data, with WTI back above $81 (after finding intraday support around $80)...



Finally, we note the market has swiftly gone from fear to greed as VIX, VVIX, and Skews are all tumbling. VVIX (vol of vol) is is its lowest since March...



Source: Bloomberg

After all, what is there to worry about? As SpotGamma notes, from today until the end of next week, there are a few data points (jobs, ISM) but, (based on IV's) they are fairly low risk. Added into this window is the Labor Day holiday (next Monday).



Entering into the week of 9/11, there are a litany of catalysts including: CPI, large Sep OPEX, VIX Exp & FOMC. This suggests to us vol may be under pressure another ~2 weeks, and then risks pick up.

While there is no particular reason to be bearish, we note that a strong rally into OPEX/VIX Exp would certainly clear up the downside "padding" that we've been enjoying (and discussing) over the last few weeks. This could make downside into end of September/October "more available".

 

Stocks & Gold Gain, Dollar Pain As 'Soft Landing' Narrative Implodes
BY TYLER DURDEN
WEDNESDAY, AUG 30, 2023 - 04:00 PM


Another day, another disappointing set of macro data that curb-stomps the 'soft-landing' narrative as US Macro Surprise Index just suffered its biggest 9-day decline since May 2022...



Source: Bloomberg

Specifically, the suddenly disappointing labor market data has sent rate-change expectations plunging below pre-Powell-Jackson-Hole levels...



Source: Bloomberg

The market is now pricing in 110bps of rate-cuts in 2024...



Source: Bloomberg

Treasury yields had a volatile day - swinging from up around 4bps to down around 6bps, as ADP disappointed (and GDP didn't help). By the close, a rather unusual event occurred with the entire curve ending practically unchanged on the day...



Source: Bloomberg

The 2Y Yield tumbled intraday to basically unchanged on the month, back into the range of the early payrolls and CPI moves...



Source: Bloomberg

The lower yields and dovish drift in STIRs sent long-duration stocks higher. Nasdaq led the day (Dow lagged but was still green). NOTE there was quite a oump and dump after the cash open but the pain trade is higher for now...



For context, this recent rebound has the S&P and Nasdaq back up to only being down around 2% on the month. Small Caps are still down 5%...



Source: Bloomberg

'Most shorted' stocks saw a 4th day in a row with an opening squeeze push, but again with little follow-through...



Source: Bloomberg

NVDA extended its bounce, but was unable to breach $500 - its Call Wall - and reversed at that resistance...



The dollar slipped lower once again, back to two week lows, but still up nicely



Source: Bloomberg

Bitcoin gave back some of yesterday's SEC-GBTC win gains, but found support around $27,000...



Source: Bloomberg

Gold continues its charge back towards unchanged on the month, nearing $1950 (spot) intraday today...



Source: Bloomberg

Oil prices ended higher today, with WTI tagging $82 intraday. Another slam-down attempt struck shortly after the inventory data showed crude stocks at their lowest since Dec 2022...



Finally, as Bloomberg's Simon White notes, stocks’ rally in response to bad economic news might be short lived as there is plenty of room to catch down to burgeoning recession risks...



Source: Bloomberg

With low volatility, more instability, and pricing that is not expectant of a near-term recession, risks are mounting for equities.

 

Bonds, Stocks, Commodities, & Crypto Hit In 'Hawkish' August As Dollar Soared
THURSDAY, AUG 31, 2023 - 04:00 PM

August saw the landing narrative shift from 'soft' to 'more aggressive' as macro data serially disappointed as the month wore on - to make the biggest monthly decline since May 2022...



Source: Bloomberg

Of course tomorrow's payrolls print is all that matters now (until next week's CPI), but this week saw the 'core services' inflation print at the second highest since 1985, while durable goods prices dropped most since 2017 MoM. GDP growth was revised lower (and is negative based on GDI). The labor market is clueless as JOLTS, ADP, Challenger-Gray, and Continuing Claims all worsened significantly while initial jobless claims fell to 2023 lows.

The last two months have seen 'soft' survey data improving while 'hard' data has disappointed...



Source: Bloomberg

Slowing growth and persistent inflation used to be the makings of a 'stagflation' scare and a reason to de-risk portfolios.



Source: Bloomberg

Nevertheless, despite the very recent dovish decline, rate-change expectations rose (hawkishly) on the month...



Source: Bloomberg

But the market is still pricing in 110bps of rate-cuts by the end of next year...



Source: Bloomberg

The slight hawkish bias sent the dollar higher - biggest monthly jump since Feb - but it has broadly speaking gone nowhere for the last two weeks...



Source: Bloomberg

And despite the rebound of the last few days, left stocks lower on the month (with Nasdaq suffering its worst monthly return since Dec 2022). Small Caps were the worst on the month...



Source: Bloomberg

The Energy sector was the only one to close green in August with Utilities weakest...



Source: Bloomberg

At one point in August, the S&P 500 was down almost 5% for the month as yields on 10-year US Treasuries hit 4.34% - their highest level since BEFORE the Great Financial Crisis - an event that ushered in a decade of ultra-low inflation and rates.

Spot the difference...



Source: Bloomberg

Most of the Treasury market was lower in price (higher in yield) on the month but, the short-end of the yield curve outperformed in August (2Y -2bps, 30Y +19bps)...



Source: Bloomberg

Commodities were broadly lower on the month with copper ugly, PMs weak, but energy was higher (with Nattie best and WTI managing to get green



Source: Bloomberg

It was an ugly month for cryptos with Bitcoin and Ethereum both down over 10% with an ugly day to close it out...



Source: Bloomberg

Today saw a wave of selling in Bitcoin, erasing the GBTC-SEC win spike, back down to $26k...



Source: Bloomberg

Finally, stocks remain decoupled from bank reserves at The Fed...



Source: Bloomberg

Maybe the consumer finally tapping out will bring the two back together again in September.

 

Biggest Weekly Short-Squeeze Since Jan Lifts Stocks; Crude Jumps, Crypto Dumps
FRIDAY, SEP 01, 2023 - 04:00 PM

Quite a week... sticky (or rising) inflation, mostly bad picture of the labor market, and sentiment softens - not exactly the goldilocks/soft-landing that The Fed and most of the talking heads keep dreaming of and in fact more stagflationary signals evident.

'Hard' data disappointed this week and fell to 4 month lows while 'soft' survey data surged back near cycle highs on the heels of hope...







Source: Bloomberg

Overall on the week, STIRs pushed dovishly lower...



Source: Bloomberg

That dovish tilt supported stocks all week - even with today's post-payrolls weakness - for big gains in Nasdaq and Small Caps (best week since March)...



The kneejerk reaction to payrolls was higher in stocks but as soon as the cash market opened, The Dow, S&P, and Nasdaq were hit by selling (higher rates, lower stocks) but the last hour saw a 0-DTE covering-driven bounce back into the green for all but Nasdaq...



And all on the back of the biggest weekly short-squeeze since January ('most shorted' stock up almost 7%)...



Source: Bloomberg

For the 3rd day in a row, NVDA was unable to break above its $500 Call-Wall level...



Staples and Utes ended lower on the week while Tech, Materials, and Energy led the gains...



Source: Bloomberg

Treasury yields exploded higher today after the payrolls data to wreck the week's trend and push the long-end higher on the week (30Y +1bps, 2Y -21bps)...



Source: Bloomberg

Which steepened the yield curve (2s30s) dramatically - up near recent highs. The 2s30s curve has risen for 5 straight sessions...



Source: Bloomberg

But, it is worth pointing out today's huge jump in yields (despite the broad weakness in jobs data) after a kneejerk lower (that's a 15bps spike in 10Y yields)...



Source: Bloomberg

Here are 10 possible reasons for the surge in yields (via Bloomberg)...

1. Hollywood strikes and Yellow Corp. bankruptcy cut 54,000 from August jobs. Without that, non-farm payrolls would have been closer to ~240,000
   
   
2. Debunking the decline in August average hourly earnings, noting it might be temporary. Companies still plan to hike wages. A special question in Monday’s Dallas Fed Manufacturing report showed companies expect to raise wages by 5% this year. That’s above the level of inflation and something that can keep the consumer spending — putting a floor under inflation
   
   
3. The slight rise in hours worked in August gives credence to Thursday’s Chicago PMI report whereby there were glimmers that business activity is getting back on track after a soft patch
   
   
4. US August ISM Manufacturing index saw rises in the overall index, production, backlogs, lead times, prices paid and employment
   
   
5. Money managers sold the long end and fast money did steepeners in swaps. Traders are short and letting those winning positions ride
   
   
6. Mortgage origination has picked up. It’s $800 million so far today, that’s up from its typical $500 million pace
   
   
7. Preparations for an onslaught of corporate supply
   
   
8. Breakout in crude oil as OPEC+ supply cuts tighten market. Option bets on $100 oil are also rising as supplies tighten
   
   
9. Saudi Arabia Aramco is considering selling $50 billion in shares. It would be advantageous for the Kingdom to keep oil supplies tighter thus prices higher through the offering
   
   
10. Federal Reserve Bank of Cleveland President Loretta Mester said inflation remains too high despite recent improvements, and the labor market is still strong

The dollar ended the week marginally higher after exploding back to Tuesday's PCE highs and Friday's Jackson Hole highs...



Source: Bloomberg

Crypto had an ugly week, legging lower again today as the dollar spiked, with Bitcoin back below $26,000. After three weeks hugging 26k, we spiked on the SEC losing but then three selling legs wiped all that lipstick off the pig...



Source: Bloomberg

Energy dominated in commodity-land this week (led by NatGas) while silver was flat and Spot Gold improved...



Source: Bloomberg

WTI soared to its biggest week since March, reaching akmosty $86, the highest since Nov 2022...



Source: Bloomberg

Gold (spot) rallied for the second week in a row, topping $1950 back at one-month highs...



Source: Bloomberg

Finally, while many continue to grasp the 'soft-landing' straw narrative, we note that despite the headline payrolls number surprising slightly to the upside, temporary help and weekly hours worked continue to point to a weakening jobs market, consistent with a drop in yields...



Source: Bloomberg

Employers typically cut hours worked and temporary staff before they lay off full-time employees. The data suggests that underlying pressures are building, and job losses should start to rise more rapidly in the coming months.

This is consistent with the message from other leading indicators, such as higher claims and tighter consumer credit conditions.

And at the same time, 'core services' inflation jumped to its second highest since 1985...



Source: Bloomberg

...and Manufacturing ISMs confirmed the stagflationary theme.

 

'Value' Stocks Puked, 'Growth' Gains, As Heavy Flow Hammers Bonds
TUESDAY, SEP 05, 2023 - 04:00 PM

A long weekend to think about how 'not-goldilocks' the jobs data really was combined with disappointing manufacturing orders data this morning prompted a bid for Nasdaq (safety in the MAG7) and selling in Small Caps as rates rose (this is since the Friday close and include futures from yesterday). Some late-day selling pressure wiped some of the lipstic off the tech pig leaving Russell 2000 down over 2%, Dow & S&P down around 0.5% and Nasdaq only marginally higher from Friday's close...



This was the Nasdaq's second best performance relative to the Russell 2000 since Nov 2021, breaking out to a new cycle high. The last time Nasdaq/Russell 2000 traded here was March 2000 - the very peak of the dotcom bubble...



Value stocks saw their 2nd biggest decline relative to growth since May today, breaking below July's lows...



To its weakest since Dec 2021...



After surging last week, Homebuilders were hammered lower today as fears of higher rates and cooling labor markets finally weighed on the stocks...



...but they've got a long way to fall given the macro data...



Source: Bloomberg

'Most Shorted' stocks were slammed lower, erasing Friday's post-payrolls squeeze...



Source: Bloomberg

Bonds were a non-stop sell-fest today thanks to a very heavy calendar with the entire curve up around 7-8bps (after rising 2bps in futures land yesterday)...



Source: Bloomberg

As Bloomberg notes, at least 40 businesses are tapping high-grade bond markets around the world on Tuesday, looking to lock in borrowing costs ahead of crucial releases of economic data and central bank policy decisions. About half of those deals are underway in the US, where it’s shaping up to be the busiest day of issuance since Jan. 3. At least six US high-grade corporate bond issuers have slated offerings for Tuesday; sales are expected to total about $120b this month, a seasonally heavy month that normally sees issuance concentrated in the week or so after US Labor Day.

Well the weight of the issuance on the Treasury market did nothing to scare off equity investors who shrugged off the recent strong relationship between yields and equity prices...



Source: Bloomberg

The dollar soared higher today (best day since March), up 3 of the last 4 days to its strongest since March (biggest 4-day jump since Feb)...



Source: Bloomberg

Bitcoin slid lower, back below $26,000...



Source: Bloomberg

Dollar strength weighed on gold, dragging the precious metal (spot) down to $1925



Source: Bloomberg

Oil prices soared after the OPEC+ headlines, pushing WTI above $88 (its highest since Nov 2022). WTI is up 8 straight days today...



Source: Bloomberg

Finally, we note that, with a US recession on the horizon, gold will probably outperform stocks. As Bloomberg's Nour Al Ali reports, measured using the ratio of gold prices to S&P 500 total returns, the metal has comfortably come out on top from the start to the end of each of the past three US recessions...



Source: Bloomberg

During the 2000 event, the ratio went from 0.15 to 0.17 over the period defined by NBER. During the global financial crisis it nearly doubled from 0.34 to 0.62, and in the Covid recession, it climbed from 0.23 to 0.28.

So today's decline in the barbarous relic is a buying opportunity?

 

Stocks & Bonds Slammed On Stagflation Scares & Tech Tumult
WEDNESDAY, SEP 06, 2023 - 04:00 PM

A rebound in prices paid in the Services sector surveys combined with hawkish comments from Boston Fed's Collins to send the dollar higher and stocks, bonds, bitcoin, and gold all lower. Oil prices bucked the trend.

Today's price action is consistent with the market dynamic we've seen play out over the past few months, characterized by elevated sensitivity to economic data, with equity markets seemingly adopting a 'bad news is good news' view, rallying on weak growth data, and selling off on strong data - amid fears that too strong data will increase the risk of an additional rate hike.

Rate-hike expectations jumped hawkishly higher after Collins told business leaders in Boston that:

"This phase of our policy cycle requires patience, and holistic data assessment, while we stay the course... And while we may be near, or even at, the peak for policy rates, further tightening could be warranted, depending on the incoming data."

With Nov odds of a hike jumping from 30% to around 45%m back up to where they were post-Powell Jackson-Hole speech...



Source: Bloomberg

'Soft' (survey) data soared to its strongest since Jan 2022 today while 'hard' data slumped to its weakest since May 2023...



Source: Bloomberg

So 'soft' survey data is showing price pressures rebounding and 'hard' data shows growth is slowing - smells like stagflation to us.

All of which weighed on stocks, dragging them all lower with Nasdaq the ugliest horse in today's glue factory (down around 1%), Small Caps were the least ugly but all majors indices are lower on the week (since Friday) with Russell 2000 hammered...



The S&P 500 closed back below its 50DMA (joining The Dow and Small Caps). Nasdaq found support at its 50DMA today...



The so-called 'Magnificent 7' stocks were slammed today - the biggest drop in a month (not helped by AAPL - hit by reports that China is banning iPhones from goct agencies; and pressure on the social media giants from EU regulatory designations)...



Source: Bloomberg

NVDA tumbled back to pre-earnings levels...



NVDA saw some modest 0-DTE call-buiying as it started to lose momentum but that was overhwlkemed by put-buying negative delataq flow into the bell...



Source: SpotGamma

0-DTE traders tried to fade the initial dump in AAPL too... then covered before a wave of 0-DTE put-buying sent the largest market cap companyt in the world dramatically lower...



Source: SpotGamma

Regional banks were dumped on the back of front-end yields rising (implying a lack of relief on the funding costs front)...



Treasuries were also dumped - especially at the shorter-end - helped by surging oil prices (2Y +7bps, 30Y unch)...



Source: Bloomberg

The yield curve (2s30s) flattened (inverted deeper), reversing all of the payrolls steepening...



Source: Bloomberg

The dollar extended recent gains - to its highest close since March...



Source: Bloomberg

Crypto was marginally lower on the day but Bitcoin saw some crazy (illiquid) moves intraday as it dived to run stops from last week's payroll drop then ran stops at $26,000 then dived back down again...



Source: Bloomberg

Oil prices bucked the broad risk-off trend, rising for the 9th straight session to close at 10-month highs with WTI topping $88...



Gold prices tumbled with Spot falling down to its 200DMA and finding support...



The relative outperformance of oil over gold has pushed the number of barrels of Saudi Crude per ounce of gold down to around 20... where next?



Source: Bloomberg

Finally, as Goldman's Brian Garrett noted this morning, it has been 91 days since the S&P 500 suffered a 1.5% loss or greater in a day...



That's unusual - it has happened only 5 times in the last 15 years. As we have discussed recently, Sep + Oct are seasonally-volatile months...



...and, at the same time, Goldman's index-trading desk highlights the "low-ness" of equity protection costs.

 

iFall: Beijing Batters US Tech, Bonds & Bitcoin Bid
THURSDAY, SEP 07, 2023 - 04:00 PM

Jobless claims at 2023 lows and an upward revision to unit labor costs both indicated strength in the labor market, which together with robust growth in the US economy, could indicate some unease that the monetary policy stance could remain tighter for a bit longer.

But it was the Semis and AAPL that ignited the pain trade after Beijing reportedly extended its iPhone ban to other state agencies.



Apple's worst 2-day drop in a year (AAPL market cap is down around $200BN) dragged it below its 100DMA...



And that weighed on the broad indices. The Dow managed modest gains on the day as Small Caps and Nasdaq lagged. The S&P ended lower



The Nasdaq dropped below its 50DMA, and Small Caps fell to the 100DMA/200DMA and found support



Did the 'Magnificent 7' just form a mega-double-top?



Source: Bloomberg

'Most Shorted' stocks were slammed for the 3rd straight day, erasing the squeeze higher that started last Tuesday...



Source: Bloomberg

Since September started, both Defensives and Cyclicals have been sold but today saw a divergence with Defensives bid and Cyclicals sold...



Source: Bloomberg

Bonds were bid today with the short-end outperforming (2Y -6bps, 30Y unch) but all yields are still higher on the week...



Source: Bloomberg

2Y Yields tumbled back below 5.00%, erasing all of yesterday's spike...



Source: Bloomberg

The yield curve steepened, erasing yesterday's flattening



Source: Bloomberg

The dollar rallied for the 5th day of the last 6, closing at new highs back to March (though the pace of acceleration has slowed)...



Source: Bloomberg

After yesterday's volatility (illiquidity), Bitcoin managed gains today, but was unable to get back tro $26,000



Source: Bloomberg

Gold dipped to $1920, erasing last week's spike higher...



Source: Bloomberg

Oil prices puked today... despite plunging inventories, production cuts, and price-hikes...



Makes you wonder, eh?

Finally, we note that The Fed's reverse repo facility continued its plunge this week...



Source: Bloomberg

Which has been supportive for stocks in the recent regime BUT at the same time, reserves are being drained...



Source: Bloomberg

And so putting them together, we now know what to watch for equity swings - when reserves drop faster than rev repo balances, equities are unsupported...



Source: Bloomberg

And we get the latest Fed balance sheet data after the bell today.

 

'Better' Data Buggers Bonds & Bullion; Beijing, Banks, & Big-Tech Batter Stocks
FRIDAY, SEP 08, 2023 - 04:00 PM

A rebound in macro data, relative to expectations this week, was notable, but it was driven mostly by 'soft' data upside surprises (and worse still, inflation-expectations rose amid slowing growth signals)...



Source: Bloomberg

Nevertheless, the market saw strength and repriced STIRs hawkishly higher on the week...



Source: Bloomberg

And that weighed on risk-assets.

Small Caps were clubbed like a baby seal this (holiday-shortened) week but all the majors ended lower...



Energy stocks dominated the week (and are up for the 9th day in the last 10) and along with Utes were the only sector in the green. Industrials and Materials were the laggards...



Source: Bloomberg

Apple suffered its second worst week since November (down 10% from highs in July) as Beijing started to clampdown on iPhone use...



AI Beneficiaries suffered this week as they failed to make a new cycle high and slipped lower...



Source: Bloomberg

...led by a big drop in NVDA, back below pre-earnings levels..



Regional bank stocks are down for the 5th week in the last 6...



...and judging by the continued surge in their usage of The Fed's emergency funds, there could be more to go to the downside...



Source: Bloomberg

The big winners of the week were fat-loss-drug-peddling companies (GLP-1) which outperformed the market and so-called 'at-risk' companies (healthcare-related firms face pressure from lower obesity, reduced cardiovascular events)...



Source: Bloomberg

It has been a big trade YTD...



Source: Bloomberg

Treasuries were mixed again today with the long-end outperforming (30Y -1bps, 2Y +3bps). On the week, all yields were higher, led by the short-end...



Source: Bloomberg

2Y Yields spiked back above 5.00% early in the week but ended back below it as the the yield curve flattened significantly...



Source: Bloomberg

The dollar surged to its best week since February and its highest weekly close since December. The dollar has risen for 8 straight weeks...



Source: Bloomberg

China's offshore yuan fell for 5 straight days against the dollar for its worst week since February to close at a record low against the greenback...



Source: Bloomberg

Notably though, the renminbi has traded stronger relative to its trade-weighted peers (i.e. against everyone but the dollar, the yuan is strengthening)...



Source: Bloomberg

Crypto had a quiet week, interrupted by yesterday's pump and dump, with Bitcoin hovering just below $26,000...



Source: Bloomberg

Oil prices rallied for the 9th week of the last 11 with WTI pushing up towards $90 (its highest weekly close since November)



Gold was modestly lower on the week (using the same time period as the chart above for some context)...



NatGas, Silver, And Crude were all down hard on the week...



Source: Bloomberg

Finally, we point out comments from Goldman's trading desk that Cyclical stocks and High-Yield credit (and credit-sensitive stocks) are priced extremely optimistically with the 'soft-landing' narrative now consensus...





However, as they highlighted, goldilocks is required as 'too-strong' data could lead to higher real rates (bad for risk assets), and 'too weak' data could severely disappoint current cyclical pricing.

 

Big-Tech Best, Bitcoin Battered As Event-Risk-Ridden Week Looms
MONDAY, SEP 11, 2023 - 04:00 PM

A relatively news-less day saw mega-cap tech (and the dollar) shrug off rising rates as bitcoin was clubbed like a baby seal.



Source: Bloomberg

Tesla soared on an MS upgrade (related more to AI)...



And so Nasdaq outperformed. The Dow and Small Caps limped lower after early gains but held on to green. The S&P was in the middle. With about 15 mins to go in the day we saw some profit-taking



0-DTE helped lift the S&P above its 50DMA but then covering dragged it back down...



This sent the Nasdaq to its all-time high relative to Russell 2000...



Source: Bloomberg

From here on it gets interesting with CPI, PPI, Retail Sales, Triple-Witching OpEx, and The Fed coming up...



Source: Bloomberg

Treasuries were mixed today but traded in very narrow ranges. The long-end underperformed with all the selling coming at the Asian open...



Source: Bloomberg

NYFRB one-year inflation expectations ticked higher (from 3.5% to 3.6%) in their latest survey echoing the recent uptick in the market's pricing for inflation expectations...



Source: Bloomberg

2Y yield topped 5.00% briefly today before falling back but ranges were very narrow...



Source: Bloomberg

The dollar dumped today, its 2nd biggest daily decline since Feb...



Source: Bloomberg

The dollar's drop hit at key resistance once again...



Source: Bloomberg

Bitcoin tumbled back below $25,000 - with some talk of FTX dumping assets - erasing all of the post-BlackRock ETF gains starting in mid-June...



Source: Bloomberg

A lot of chatter in crypto that Altcoins face significant downside as FTX potentially seeks to dump its $3.4BN digital asset holdings. And this is happening as BTC is close to a 'death cross' - 50DMA dropping below 200DMA...



Source: Bloomberg

Oil prices were modestly lower on the day, but look like they are coiling-up/consolidating after the big jump...



Gold ended higher, holding some of the overnight gains (twice topping $1930 Spot)...



Source: Bloomberg

Finally, with Triple-Witching looming, we note that Goldman suggests VIX is significantly 'cheap' (low) relative to the macro-environment...



And remember, the seasonals favor you...



Is everyone really prepared for a resurgence in CPI?

 

Bitcoin, Banks, & Black Gold Bid As Tech Stocks Tumble Ahead Of CPI
TUESDAY, SEP 12, 2023 - 04:00 PM

Weaker US Small Business optimism and German sentiment back at COVID-lockdown lows were the only macro catalysts of note today as micro-events dominated (ORCL earnings and AAPL launch event). Though we do have to caveat that with the fact that the Census Bureau reported a decline in real household incomes in the US for the 3rd year in a row...



So much for Bidenomics.



Apple stock slid on its big innovative new iPhone/Watch release (on lower than expected price points)...“There is some disappointment the company didn’t raise iPhone prices on models other than the Pro Max, but the presentation spent a lot of time emphasizing the higher-end devices over the base ones (which could help drive the mix in favor of Pro and Pro Max vs. 15 and 15 Plus)”



Banks were bid today...



Both of which dragged down the Nasdaq (and S&P). About 30 mins into the AAPL launch event (around 1330ET), all the majors started to see heavy selling pressure which dragged Small Caps and The Dow into the red...



All the majors closed below their 50DMAs (Russell 2000 below its 100DMA)...



Treasuries were mixed with the short-end lagging (2Y +2bps, 30Y -3bps)...



Source: Bloomberg

The 2Y Yield pushed barely back above 5.00% but the ranges were very narrow once again...



Source: Bloomberg

The yield curve (2s30s) flattened, erasing yesterday's steepening...



Source: Bloomberg

The dollar ended higher on the day but was sold for most of the US session...



Source: Bloomberg

After yesterday's puke back below $25k briefly, today saw Bitcoin panic-bid back up to $26,500...



Source: Bloomberg

Oil prices surged, breaking out of their pennant pattern with WTI tagging $89 - its highest since Nov '22...



Gold was lower on the day with spot trading below $1910 intraday...



Source: Bloomberg

Finally, with Triple-Witching looming, you are here...



Brace for the unclench.

With all eyes focused (for now) on tomorrow's CPI, we are seeing inflation expectations (1Y inflation swap) surging higher again...



Source: Bloomberg

That will spoil the 'goldilocks' narrative.

 

Bonds & Big-Tech Bid After Soaring CPI, Banks & Black Gold Skid
WEDNESDAY, SEP 13, 2023 - 04:00 PM

US mortgage applications plunged to the lowest since 1996 this morning...



Source: Bloomberg

...but all anyone really cared about was CPI which had something for everyone in the goldilocks narrative: 'hot' headline inflation, 'cold' shelter inflation, 'just right' core inflation... and also the little red riding hood narrative with 'my what a big mouth you have' energy inflation.

Don't forget, as Goldman noted, core CPI (ex-shelter) is expected to rise significantly for the rest of the year, because of Seasonality - Residual seasonality biased the summer inflation numbers lower. Look for travel related inflation to pick-up in particular; Health insurance - CPI’s health insurance component is due to reset sharply higher in October, when the CPI will use new data on health insurer profitability to determine the rate of monthly health insurance inflation for the next twelve months; and Services - We also expect upward pressure on core services ex-housing from health care and education services, where prices tend to lag the cost environment because both government-administered and private prices are reset infrequently. The higher cost of nurses and teachers is likely to flow through to higher fees for healthcare services and school.

The initial reaction to the CPI data pinned off the hot headline with yields spiking, stocks dropping, dollar spiking, and rate-hike expectations rising.

But that quickly faded.

Rate-hike odds for September (next week) collapsed to basically zero (2% odds of 25bps), November's odds dipped to around 40% of a 25bps hike. Further out (June 2024) saw odds rising quickly of a rate-cut...



Source: Bloomberg

That sparked a major reversal in bonds (yields tumbled) and the dollar (dropped) as Nasdaq (longer duration stocks) rallied.

Selling pressure came back on after 1430ET (margin call time) and wiped any lipstick off today's pig with Small Caps the biggest laggard (along with The Dow and S&P also red). The S&P bounced into the green by the close as Nasdaq led with modest gains...



Opening gains for banks were erased immediately and then some...



NFLX was pummeled after admitting its ad revenues were not material...



0-DTE traders saw very heavy negative delta flow, dominated by put-buying, which faded all the bounces in the underling S&P 500...



Source: SpotGamma

'Most Shorted' stocks were clubbed like a baby seal, erasing all the gains since late-August's big squeeze...



Source: Bloomberg

Semis pumped and dumped today ahead of tonight's ARM IPO (perhaps funding needs?)...



Source: Bloomberg

Treasuries were bid after some early weakness with the belly outperforming (2Y +4bps, 5Y +5bps, 30Y +2bps). NOTE the last two days have seen very narrow ranges and today took out the highs and lows of that range...



Source: Bloomberg

2Y Yields fell back below 5.00% again...



Source: Bloomberg

The dollar ended the day unchanged but traveled a lot on the way intraday...



Source: Bloomberg

Bitcoin also ended practically unchanged, holding above $26,000...



Source: Bloomberg

Oil joined the dollar and bitcoin in the 'practically unchanged' cohort. After topping $89.60 intraday, WTI slid back into the red very marginally...



Gold (spot) drifted lower but in a very small range and held above yesterday's lows...



Source: Bloomberg

Finally, The Fed and The White House may have a problem in Q4. While inflation is top of mind today (and hotter than expected), it's growth that also matters and Goldman expects the resumption of student loan payments, a potential temporary federal government shutdown, and reduced auto production from a potential UAW strike to slow US GDP growth in 4Q23.



We love the smell of stagflation in the morning...

 

Bears disARM'd: Stocks, Yields, Crypto, & Crude Jump As Inflation Expectations Soar
THURSDAY, SEP 14, 2023 - 04:00 PM

Hot jobless claims, hotter retail sales, and hottest PPI made for an exciting "is good news, bad news?" confusion in markets early on before bonds took charge with yields deciding on 'growth' and shooting higher along with stocks (which decided to ignore the higher rates). The dollar and bitcoin also rallied.

Crucially, however, the market's expectations for short-term inflation continued to surge (to 6-month highs)



Source: Bloomberg

Rather oddly, this hotter than expected growth (retail sales and jobs) and inflation (PPI) pushed the market's expectations for Fed rate changes dovishly lower (admittedly only modestly). However, rate-cut expectations did drop (hawkish) modestly for next year...



Source: Bloomberg

Stocks (futures) traded wildly after the 0830ET data dump but as the cash open hit, Nasdaq was dumped and Small Caps pumped. That didn't last long and after around 1030ET, buying began and never really lifted as traders 'survived' the big event risk of the week. Small Caps outperformed (short squeeze) while Nasdaq ans S&P lagged (but all were green)...



While some discussed the 'fundamental' driver of today's move, we note that 'most shorted' stocks were smashed/squeezed rapidly higher, erasing yesterday's decline...



Source: Bloomberg

Today's rally lifted all the majors back above key technical levels (Russell 2000 above its 100DMA; S&P, Dow, and Nasdaq above 50DMAs)...



ARM IPO'd at $51, opened at $56.10, jumped, dumped, then surged into the last few minutes...



VIX tumbled all the way back to a 12 handle...



Treasury yields were all higher on the day (up 4-5bps), pushing them all higher on the week...



Source: Bloomberg

The 2Y Yield pushed back above 5.00%... again...



Source: Bloomberg

The dollar remains lower on the week but jumped notably today as EUR tumbled after ECB...



Source: Bloomberg

Bitcoin extended its bounce, pushing up towards $27,000...



Source: Bloomberg

Gold (spot) ended the day unchanged after bouncing intraday off a near $1900 test...



Source: Bloomberg

Oil prices continued to rise with WTI topping $90 for the first time since Nov 2022 - which just happens to be more or less in line with where it was trading right before Putin invaded Ukraine...



Source: Bloomberg

Finally, The Fed and The White House have a problem as those surging oil prices are dragging wholesale gasoline prices higher (with gasoline stocks at the lows of the year) which will inevitably drag pump prices higher...



Source: Bloomberg

...and that means inflation (perceived by the average joe) will be top of mind once again and the Biden admin has used up its geopolitical (Saudi) and domestic (SPR) ammo to do anything about it this time.

 

Crude Pumped To 10-Mth High As Stagflation-Scares Slam Stocks & Bonds
FRIDAY, SEP 15, 2023 - 04:00 PM

'Hope' continued to soar this week as 'soft' survey data soared to its highest since Jan 2022 while 'hard' macro data hovered near 6-month lows...



Source: Bloomberg

But it was inflation was spooked everyone (CPI hot, PPI hot, Import/Export prices hot) but UMich sentiment inflation expectations tumbled even as the market's inflation expectations spiked...



Source: Bloomberg

Also, bear in mind that core retail sales disappointed, industrial production slowed, and headline consumer sentiment declined. So slower growth/demand and higher inflation... brilliant.

The Nasdaq fell for the second week in a row and was the biggest loser while The Dow clung to unchanged...



All the majors fell back below their key technical levels today...



Tech stocks suffered the most this week, while Utes outperformed (even with rising rates). Energy ended around unchanged...



Source: Bloomberg

Semis were hammered lower today...



Source: Bloomberg

The so-called 'Magnificent 7' puked today, erasing all of the week's gains...



Source: Bloomberg

While NFLX was clubbed like a baby seal this week, AI-hero NVDA tumbled for the second straight week, back well below the last earnings level (down 13% from its record high after earnings)...



'Most Shorted' stocks fell for the 2nd week in a row (down 6 of the last 7 weeks)...



Source: Bloomberg

Treasuries were sold again today (2nd day in a row) with the selling starting at the European open and going thru the European close. That lifted all yields higher on the week with the long-end underperforming...



Source: Bloomberg

The 2Y Yield rose back above (and closed above) the key 5.00% level...



Source: Bloomberg

The dollar ended the week lower but at the upper end of its intra-week range...



Source: Bloomberg

Crypto was mixed this week with Bitcoin eking out modest gains (back above $26,500) and Ethereum slightly lower. Solana was the ugliest horse in the glue factory...



Source: Bloomberg

Gold (spot) ended the week higher, bouncing strongly to the week's highs after testing down to $1900 yesterday...



Source: Bloomberg

Oil prices rose for the 10th week of the last 12 with WTI topping $91, back at levels just prior to Putin's invasion of Ukraine...



Source: Bloomberg

Is the soaring gas price already having an impact on demand for gasoline?



Source: Bloomberg

Finally, is the AI bubble froth being blown off?

As Vanda Research notes, the allure of AI stocks is steadily waning, with retail investors showing a decline in their net purchases of AI-related stocks. This diminishing interest is further evidenced by a notable reduction in the frequency of Bloomberg stories covering the AI sector.



The analog remains...



And don't forget that the period from Sept 20-month-end is the worst 'season' for US equities...



And remember the "Week After" Sep Op-Ex has been remarkable in its "consistent weakness", lower 26 of 33 times since 1990, with a median return -1.0% at a 22% hit-rate (i.e. "higher" only 22% of the time)



With the gamma unclench after today's quad-witch, do you feel lucky?

 

Bitcoin & Big-Tech Pump-And-Dump; Gold Gains As Yield-Curve Crushed
MONDAY, SEP 18, 2023 - 04:00 PM

Quiet-ish post-quad-witch unclenching of gamma with the big decline in homebuilder confidence probably the most notable macro news - somewhat ruining the soft-landing religion.

VIX continued higher after OpEx fom Friday's open as gamma unclenched...



The cash open was very messy in stocks today - Small Caps puked, mega-cap tech bid and then reversed. Small Caps extended losses but the rest of the majors lifted majestically into the European closed before giving it all back...



Regional banks skidded to 2 month lows...



0-DTE traders fought the S&P rally in the morning... and won...



Source: SpotGamma

'Most Shorted' stocks fell further today, unable to stage a squeezy comeback...



Source: Bloomberg

NVDA's decline left it unchanged for the last three months...



Bonds were mixed with the long-end outperforming (30Y -3bps, 2Y +3bps). Japan was closed...



Source: Bloomberg

Yield curve flattened (2s30s inverted deeper) bigly back to recent lows...



Source: Bloomberg

Bitcoin pumped and dumped... again... jumping up around $1000, just shy of $27,500 before giving it all back...



Source: Bloomberg

The dollar went nowhere for the second day in a row...



Source: Bloomberg

Spot Gold rallied further (back above $1930)...



Source: Bloomberg

Oil prices managed to hold gains (despite intraday dump). WTI found support at $90...



Finally, we note that he last few days have seen a trend change in rate expectations. While this year remains on a more dovish trend (no more hikes), next year is shifting hawkishly (less and less cuts)...



Source: Bloomberg

We suspect this "higher for longer" shift is exactly what The Fed wants to see ahead of this week's meeting.

 

Bond Yields Blasted To 16 Year Highs; Stocks Sink Ahead Of Fed
TUESDAY, SEP 19, 2023 - 04:00 PM

Ugly Canadian CPI, surging crude prices (early - on Azerbaijan angst)), mixed housing data, and a trigger happy group of traders anxiously awaiting tomorrow's Fed-sponsored narrative all sparked some chaotic moves in markets today.

The headline-making market of the day is USTs today with a double-barf sending yields 5-7bps higher on the day...



Source: Bloomberg

Which pushed yields to their highest since 2007...



Source: Bloomberg

With bonds at their cheapest to stocks since Oct 2007...



Source: Bloomberg

At the very short-end of the curve, the market has really started to embrace the 'higher for longer' narrative as this year's rate-change expectations have drifted (dovishly) lower (less expectations of more rate-hikes) while next year's rate-change expectations have surged (hawkishly) higher, pricing out expectations of rate-cuts...



Source: Bloomberg

All of which pressured stocks lower - especially longer-duration assets. After Europe closed, the algos tried to lift the major indices back to unch but failed. All the major indices closed red (down 02. to 0.3% on the day)...



CART IPO'd at $30, opened at $42, rallied up to $42.95 before fading the rest of the day...



ARM fell back below its post-IPO opening price...



Regional banks keep falling - now back at SVB tumble lows...



The dollar chopped around but ended back in the very tight range of the last couple of days...



Source: Bloomberg

Bitcoin bounced back above $27,000...



Source: Bloomberg

Gold (spot) neared $1940 intraday, but ended unchanged...



Source: Bloomberg

Oil prices pumped (to new cycle highs) and dumped (WTI finding support at $90) to end practically unchanged...



Finally, with real yields hitting fresh highs, one wonders when reality hits for equity valuations?



Source: Bloomberg

Consider what kind of shift (down) in real yields it would take to rationalize this valuation (economic depression?)

 

Stocks & Bonds Slammed As Powell Pi$$es In Next Year's Punchbowl
WEDNESDAY, SEP 20, 2023 - 04:01 PM

If you're not confused now, you weren't paying attention.

• Fed held rates unchanged (as expected) - neutral.
  
  
• Fed increased its growth expectation, lowered its unemployment expectation, and increased its inflation outlook - dovish/soft-landing.
  
  
• Fed erased 50bps of cuts expected for next year in its dot-plot - hawkish as hell.

That sent STIRs hawkishly higher...



Source: Bloomberg

Mohamed El-Erian offered the most succinct summary of the malaise many were left in after the statement, the SEP, and the press conference:

"I worry that the economic and policy signals coming out of this Federal Reserve press conference may come across to many as both confused and confusing.

Some will deem this an inevitable consequence of this phase of the inflation and policy cycle; others will view it as further evidence of challenged Fed communication."

And the Dot-Plot crushed expectations for cuts next year...



Source: Bloomberg

Treasuries were mixed on the day - and very volatile - with the short-end dramatically underperforming. 2Y ended up 6bps while 30Y was down 3bps on the day. On the week, the long-end is lower but the short-end is significantly higher...



Source: Bloomberg

The pattern was similar for all bonds (except the 30Y) with early gains (erasing yesterday's losses) quickly being eviscerated on the Fed's SEP.



Source: Bloomberg

10Y yield broke out from the August highs late in the day to their highest since Oct 2007...



Source: Bloomberg

And 2Y yields soared to a new high since July 2006 (2y yields rose 14bps off the intraday lows this afternoon)...



Source: Bloomberg

All of which crushed the yield curve (2s30s)...



Source: Bloomberg

Equities did what equities do around the FOMC. The kneejerk move was lower (hawkish SEP), but the second Powell started speaking the algos ripped the market back up to unch... but this time, they could not hold it and stocks tanked to the lows of the day, extending losses after Powell stopped speaking. Nasdaq (longest duration stocks) suffered most...



Gamma-heavy 4500 was key resistance for the S&P 500...



0-DTE selling was dominant after The Fed but we note that the S&P fell down to exactly match its Put Wall level...



Source: SpotGamma

'Most Shorted' Stocks puked hard today with no bounce at all...



Source: Bloomberg

CART was carried out today, plunging all the way back to its IPO price...



The dollar dumped overnight into The Fed statement then exploded higher...



Source: Bloomberg

Bitcoin ended lower, falling back below $27000 as stocks tumbled...



Source: Bloomberg

Gold (spot) rallied up to near $1950 intraday before fading as the dollar spiked after The Fed...



Source: Bloomberg

Oil prices managed gains on the inventory data but The Fed's hawkishness dragged WTI back below $90...



Finally, with Powell and his pals pissing in the punchbowl of rate-cuts for next year, one has to wonder just how long this chasm between real rates and equity valuations can remain...



Source: Bloomberg

...and real rates are getting higher.

 

Bond Bloodbath Trounces Tech; Batters Bitcoin, Banks, & Bullion
THURSDAY, SEP 21, 2023 - 04:00 PM

A central bank smorgasbord started the day off with a bang of confusing cross-currents (SNB/BOE unch; Riksbank/Norges hiked and hawkisher; and Turkey hiked in line) - all sending the dollar higher further. Domestically, just as much confusion: a hot labor market (claims plunging), and inflation fears rising (Philly Fed prices paid), along with housing getting hammered (existing home sales slump).

But it was still The Fed that was on everyone's mind, and the market's expectations for rate-cuts next year are quickly be reduced from over 6 rates cuts implied in July to around 3 cuts in 2024 now...



Source: Bloomberg

We suspect it may need to go lower than that (fewer cuts still).

Treasuries were mixed (basically some giveback to yesterday's moves with the short-end outperforming - 2Y -3bps, 30Y +11bps), but combining the two days, all yields are still significantly higher...



Source: Bloomberg

...leaving the yield curve (2s30s) steeper (less inverted)...



Source: Bloomberg

For context:

• 2Y yields hit their highest since July 2006
  
  
• 5Y yields highest since Aug 2007
  
  
• 10Y highest since Nov 2007
  
  
• 30Y highest since April 2011

Source: Bloomberg

All of which weighed on stonks with the longest-duration (tech) hit hardest. Nasdaq is down over 3% post-FOMC. The Dow was the least ugly horse in the glue factory and is down almost 2% post-Powell...



As we detailed earlier, the key level to watch is the medium-term momentum threshold of 4353, below which the CTA community will start to flip negative and selling will accelerate...



The S&P is back at 3-month lows (and we note that Small Caps are up just 1% year-to-date).



All the majors are back below their 100DMAs with Small Caps back below their 200DMA...



And VIX broke back above 17...



Banks broke down to initial SVB-puke lows...



The dollar extended gains intraday to its highest since March 2023 before giving some back...



Source: Bloomberg

Bitcoin broke back below $27,000 as stocks started to sink...



Source: Bloomberg

Despite plenty of intraday vol, oil prices ended around unch with WTI sliding back below $90 from its midday bounce highs...



Gold chopped around but ended notably lower (despite heavy call demand)...



Finally, NVDA losing the battle?



Source: Bloomberg

A new cycle high for real rates... and S&P valuations starting to crack...



Source: Bloomberg

Can The Fed stand pat if the S&P loses 5 turns of fwd P/E? Do you feel lucky?

 

'Higher For Longer' Reality-Check Wrecks Bonds, Banks, & Big-Tech
FRIDAY, SEP 22, 2023 - 04:00 PM

Despite being told - for months - that The Fed wanted to keep rates "higher for longer" and that a 'pause' is not the start of a rate-cut cycle, markets ignored it... until this week. As the following chart of Google Trends shows, it appears people are 'believers' once again...



The Fed's blackout window lifts and the jawboning begins - and everyone said the same thing: "higher for longer":

• *FED'S COLLINS: FURTHER FED HIKES 'CERTAINLY NOT OFF THE TABLE', EXPECT RATES MAY HAVE TO STAY HIGHER FOR LONGER
  
  
• *FED's BOWMAN: MORE RATE HIKES LIKELY NEEDED TO GET INFLATION TO 2%, NEED TO REPEAT MONETARY POLICY ISN'T ON PRESET COURSE
  
  
• *FED'S DALY: I DON'T GET TO A POINT WHERE I'M READY TO DECLARE VICTORY, UNLIKELY INFLATION WILL REACH 2% GOAL IN 2024

On the week, between the data, the SEP, and the FedSpeak, the market has repriced its expectations for The Fed's rate trajectory significantly with rate-hike odds in 2023 lower and rate-cut odds in 2024 significantly lower...



Source: Bloomberg

And bear in mind that the supposed 'strength' in US macro data has been driven by 'soft' survey data as 'hard' real data has tanked...



Source: Bloomberg

Small Caps (heavily shorted) and Nasdaq (mega-cap tech, long duration) were the hardest hit on the week with the S&P close behind. The Dow was the prettiest horse in the glue factory, down around 2% on the week. Overall, US equities closed "on the lows" ugly going out...



The choppiness seen in the last hour or so was driven by the market's big shift to a negative gamma market...



Source: SpotGamma

All the majors closed below key technical levels...



"Most Shorted" stocks are on pace to see their second straight month of declines (and 7th down week of the last 8). This was the biggest weekly decline in the short-basket since March...



Source: Bloomberg

As Goldman traders noted, "It feels like sell-the-rally mode (and the market is susceptible locally to a squeeze given the quick pick-up in shorts). Overall, the equity market seems to be suggesting that economic growth expectations are being downgraded, and soft-landing trades are at risk."

As Vanda Research notes, inflows into the artificial intelligence (AI) sector continue to decline.

Companies such as MSFT, IONQ, AI, as well as NVDA and PLTR are all witnessing diminishing interest from retail investors.



As we extensively analyzed in earlier reports, the combination of waning retail demand and cautious risk sentiment among institutional investors may pose a substantial risk to the AI sector, potentially heralding a pronounced reversal in the weeks ahead.

It's a long way down...



Source: Bloomberg

VIX jumped back above 17 on the week (which is a relatively big deal given its compression of late)...



UBS traders noted that high Touch flow skewed to the sell side from Monday through Thursday as Long Only took profits and Tax loss selling picked up. Long Only and Hedge Funds turn buyer Friday.

Market downdraft and VIX uptick trigger systematic fund selling.

Retail continues to sell single stocks against ETFs albeit at a reduced pace this week.

Derivative desk did not see investors chase the downside as positioning already defensive, and the focus remains on sector rotations.

Derivative flows have been large counter-trend to the bid to vols with a massive about of overwriting supply hitting the tape.

The synchronized slide across stocks, bonds and many commodities hammered risk parity players, as evidenced by the $926 million RPAR Risk Parity ETF suffering its worst day since December and sent the fund to its lowest in 10 months...



Source: Bloomberg

Treasury yields were all higher on the week, despite a pullback today, with the curve basically converging and yields up 9-11bps across the curve...



Source: Bloomberg

For context, the 2Y yield erased most of Wednesday's post-Powell spike...



Source: Bloomberg

The dollar rallied on the week (up for the 8th week of the last 9)...



Source: Bloomberg

Bitcoin was noisy on the week but basically closed unch around $26,500...



Source: Bloomberg

Oil prices caused lots of excitement intraweek but ended unchanged with WTI hovering around $90.50...



Gold was flat on the week, breaking below its 200DMA...



..., but rallying back this afternoon to get back to that key technical level...



Finally, this morning's PMIs confirmed the overall trend of slowing growth (contraction in manufacturing and low growth in services) along with re-accelerating inflation (prices paid bouncing). That stagflation regime change is evident on a global scale...



Source: Bloomberg

How long before all the 'on hold' central banks start tightening again? Or is the next move a widespread deflationary malaise that brings out the doves?

 

Bonds & Bullion Dumped, Dollar Jumps As Shutdown & Student-Loan Cliff Loom
MONDAY, SEP 25, 2023 - 04:00 PM

As the final week of September (and Q3) begins, two large tail risks loom over the market (and economy): government shutdown and student-loan-payment resumption.

Both could trigger notable declines in GDP: Goldman estimates that a government-wide shutdown would reduce quarterly annualized growth by around 0.2pp for each week it lasts after accounting for modest private sector effects; and expect the resumption of student loan payments to subtract 0.5pp from quarterly annualized GDP growth.

And just to pile on, as growth could slow, inflation threats are re-asserting themselves (via commodities) and hurting sentiment optically and actually via soaring gasoline prices.

That stagflationary impulse is clearly evident in forecasts for next year...



Source: Bloomberg

Safe-haven cash demand ahead of the potential shutdown helped send the dollar higher - breaking out to its highest since Dec 2022. Today was the biggest jump in the dollar in 3 weeks, and is up 4 days in a row...



Source: Bloomberg

Bonds were sold with both hands and feet today with the long-end dramatically underperforming (30Y +13bps, 2Y +2bps)...



Source: Bloomberg

The 10Y Yield reached its highest since Oct 2007...



Source: Bloomberg

Smashing the yield curve (2s30s) dramatically steeper (less inverted) -now at its least-inverted since May...



Source: Bloomberg

And remember, the re-steepening is the bad part, as BofA CIO Michael Hartnett - the most vocal bear at Bank of America - made an important observation, pointing out that at a time when everyone is predicting a soft landing, the hard landing “tells” are lining up: yield curve steepening -110bps to -67bps, unemployment rate up 3.4% to 3.8%, personal savings rate up 3% to 4-5% YTD, and maybe most importantly, HY defaults are up 1.6% to 3.2%, credit card delinquencies are up by half, from 0.8% to 1.2%, while auto delinquencies are soaring, up 5.0% to 7.3%.

The dollar's gains were gold's losses as the precious metal tumbled back to last week's lows...



Oil prices also lagged on the day with WTI back below $90...



Bitcoin tumbled back down to $26,000 and found support...



Source: Bloomberg

For a change, we end with stocks where 'most shorted' names fell for the 7th straight day (despite a good try for a squeeze early on...



Source: Bloomberg

And as we noted earlier, the last six weeks have seen the most intense 'shorting' by hedge funds since Sept-Oct 2022...



The market is very much in a negative gamma environment...



Source: SpotGamma

And while the negative gamma typically exaggerates the intraday moves, 0-DTE is battling that trend, with its mean-reverting tendency...



Source: SpotGamma

All of which saw equity markets' early weakness (during the early European session) whipped back into positive territory as US opened, then oscillate in a narrow range for the rest of the day. The Dow was the laggard (around unch) while the rest of the majors managed modest gains...



The Dow bounced at its 200DMA...



Biotech stocks made headlines, down for the 8th day of the last 9 to its lowest since June 2022...



Source: Bloomberg

VIX slipped back below 17...



Finally, as real rates reach a new cycle high, so the valuations on stocks are starting to wake up to that reality (no pun intended)...



Source: Bloomberg

How much of that 5-turn collapse in the S&P 500 will The Fed stand for before it steps in? That's the bet.