Daily Stock Market Recap per ZH

Good (Auction), Bad (LEIs), & Ugly (AI) Sustain 'Goldilocks' Gains In Stocks & Bonds
MONDAY, NOV 20, 2023 - 04:00 PM

Leading Economic Indicators continued their worst-since-Lehman path to recession but somehow 'goldilocks' economic narratives dominate of barely-any-landing-at-all & slowing inflation, and financial conditions continue to loosen, erasing more and more of "The Fed's work" prompting the FCI-Doom-Loop to return...



Source: Bloomberg

Of course, the day was dominated by the utter shambles surrounding OpenAI and its 'get woke, go broke' board which sent MSFT shares to a new record high (as they scooped up Altman along with the option basically the entire brain of OpenAI)...



...and apparently whats good for MSFT AI is good for NVDA (despite chatter of Altman creating an AI chip rival)...



But, a strong 20Y auction at 1300ET prompted a huge buying program...



Source: Bloomberg

...which lifted stocks to the highs of the day (as yields tumbled) as Nov 9th's 30 year auction chaos did not repeat.

Nasdaq outperformed, Small Caps underperformed but all the majors were green on the day. Some late-day selling pressure wiped a little lipstick off the squeezey pig...



One thing to note - last week saw massive fun inflows into QQQ - the last three times flows have been this high marked turning points in the Nasdaq...



Source: Bloomberg

Notably, 'Most shorted' stocks squeezed hard into the 20Y auction but faded after...



Source: Bloomberg

0-DTE traders bought calls non-stop with put delta basically flat...



Source: SpotGamma

VIX plunged to a low 13 handle - the lowest since Sept 15th...



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



Source: Bloomberg

...which means the yield curve flattened further (2s30s most inverted since the start of October)...



Source: Bloomberg

The Dollar tumbled to its lowest since the end of August...



Source: Bloomberg

...extending its YTD losses and breaking below the key 200DMA technical support...



Source: Bloomberg

Bitcoin rallied after crypto-friendly Milei was elected in Argentina (and headlines around a possible Binance settlement were also supportive)...



Source: Bloomberg

Oil prices extended their bounce from Friday afternoon with WTI hitting a $78 handle before pulling back a little...



Gold ended lower, but futures bounced off $1970 intraday...



Finally, spot the odd one out...



Source: Bloomberg

Financial conditions are near the tightest they have been this cycle and Leading Economic Indicators have fallen at their fastest pace since Lehman... as the Nasdaq nears record highs.

 

Bonds & Bullion Bid On Bad Data As Banks & Big-Tech Give Back Gains
TUESDAY, NOV 21, 2023 - 04:00 PM

Add the Chicago Fed's National Activity Index and Existing Home Sales to the list of disappointing macro data recently, and the soft-landing (or even goldilocks) narratives are starting to sound like a fairy tale...



Source: Bloomberg

Financial Conditions continue to loosen dramatically...



Source: Bloomberg

Treasury yields were mixed with a steepening bias (2Y -3bps, 30Y unch), which recoupled yesterday's flattening...



Source: Bloomberg

Stocks were lower, given back much of yesterday's gains with Small Caps the biggest loser (red on the week)...



Yesterday's squeezed-stocks reversed their gains today...



Source: Bloomberg

Mega-Cap tech erased much of yesterday's gains...



Source: Bloomberg

Banks gave back recent gains, back to one-week lows...



VIX continued to decline today (to 131.13) as Skew hit a record low. SDEX index (in red), measures the value of a 1-month at-the-money SPY put, vs a 1-month "one standard deviation out-of-the-money" put, reflects put prices are sliding markedly lower.



Source: Bloomberg

The dollar rebounded during the US session today to end marginally higher (after 6 down day in the last 7)...



Source: Bloomberg

It was a choppy day in crypto-land amid headline about DoJ freezing some Tether holdings and the Binance settlement. BTC tumbled to $36.300 before bouncing back up to $37,500 and settling around $37,000...



Source: Bloomberg

Spot Gold prices topped $2000 once again...



Source: Bloomberg

Oil prices were flat on the day, with WTI hovering around $78



And finally, of course, NVDA reports tonight..



Source: Bloomberg

What happens next?

 

Bond Yields & Bitcoin Jump As Black Gold Dumps'n'Pumps
WEDNESDAY, NOV 22, 2023 - 04:00 PM

Jobless claims surged on an un-adjusted basis, durable goods orders dumped, consumer sentiment slumped, and inflation expectations jumped... US macro data is not signaling a 'soft landing...



Source: Bloomberg

...but apart from that "the consumer is resilient and look over there at NVDA's earnings". But, despite smashing it on earnings, NVDA actually traded lower (as anxiety over Biden's China crackdown weigh a smidge)...



Stocks took a spill around 1200ET, with some suggesting it was due to the explosion on the US, but managed to maintain some gains ahead of Turkey day. Small Caps outperformed modestly but all the majors traded pretty much in sync amid low liquidity...



Energy stocks are the only sector red on the week, despite the big rebound today as Healthcare and Tech (an unusual pair) lead on the week...



Source: Bloomberg

Apple topped the $3 trillion market cap level intraday ...



Source: Bloomberg

VIX tumbled to a 12 handle close (the lowest for the day before Thanksgiving since 2019)...



Treasury yields were up across the curve today with the short-end underperforming (2Y +3bps, 10Y +1bp)...



Source: Bloomberg

The dollar rallied into the green for the week briefly and then faded back...



Source: Bloomberg

Bitcoin was bid back above $37,000...



Source: Bloomberg

Spot Gold prices fell back below $2,000...



Source: Bloomberg

Oil prices dumped on headlines that OPEC+ was delaying its meeting, then pumped back as analysts suggested that the meeting delay is “counter-intuitively reassuring” as it will help create “cohesion around collective cuts"...



Finally, stocks are playing catch-up to seasonals...



...to the moon!

 

Stocks Surge For 4th Straight Week Amid US Macro Meltdown
FRIDAY, NOV 24, 2023 - 01:00 PM

Stocks rallied for the 4th straight week - longest sin-streak since June - led by The Dow, and Small Caps surge today back into the green for the week...



... as plunging US Macro data...







Source: Bloomberg

...supported the trend for rising expectations of rate-cuts...



Source: Bloomberg

...just ignore the implied recession needed to fulfill expectations for 100bps of cuts next year!

Meanwhile, financial conditions have done nothing but loosen since Powell mentioned the market doing The Fed's job of 'tightening'...



Source: Bloomberg

US equity majors are up 9-13% off the late October lows...



Source: Bloomberg

Interestingly, tech underperformed on the week while energy stocks soared (despite being barely positive)...



Source: Bloomberg

Treasury yields ended higher on the week (largely thanks to a 6-8bps jump in yields today) with the short-end underperforming on the week...



Source: Bloomberg

The dollar ended lower for the 3rd week of the last 4, at 3-month lows...



Source: Bloomberg

Ethereum outperformed Bitcoin on the week, rallying back above $2100...



Source: Bloomberg

Bitcoin broke out to a new cycle high, near $38,500...



Source: Bloomberg

Spot Gold prices jumped back above $2000 (silver outperformed on the week, up 2.5%)...



Source: Bloomberg

Oil prices ended the week very marginally higher (after 4 weeks down in a row), but with plenty of chop on the way...



Finally, with regard to the 'Santa Rally', Goldman Sachs notes that on a 10-year lookback, equities tend to struggle in December, particularly the Mag 7...



Source: Bloomberg

And with the S&P higher 15 of the last 18 sessions, on track to post its best month since July off 2022, bringing us back to multi-month highs in terms of prices, but in terms of valuation as well. Across eight different measures, the median absolute metric trades in its 89th percentile relative to history.



Do you feel lucky?

 

Bonds & Bullion Shrug Off Black Friday Blues; Banks & Builders Bruised
MONDAY, NOV 27, 2023 - 04:00 PM

Ugly home sales data and a dismal dip back into contraction for Texas manufacturing production continued the trend of disappointing macro data...



Source: Bloomberg

Black Friday was 'mixed' according to reports.



No one really knows how the American consumer did over the weekend - choose your own adventure:

• HOT - Black Friday e-commerce spending popped 7.5% from a year earlier, reaching a record $9.8 billion in the U.S., according to an Adobe Analytics report.
  
  
• COLD - Morgan Stanley analyst Alex Straton's Black Friday store checks pointed to ~flat to down Y/Y traffic across Softlines Retail/Brands. Goldman Sachs analyst Kate McShane visited various retailers on Black Friday, noting that overall traffic still appeared muted relative to 2019 at most "traditional" Black Friday weekend destinations
  
  
• JUST RIGHT? - Mastercard Spendingpulse said on Saturday that U.S. retail sales on Black Friday rose 2.5% year-over-year

Mickey Drexler summed it all up best: Black Friday is a "race to the bottom," that trains consumers to always expect discounts - significantly cutting into retailers' margins

One look at bonds today suggests that Morgan Stanley and Goldman Sachs may be on to something as yields tumbled (with the long-end outperforming today: 30Y -7bps, 2Y -4bps), erasing much of Friday's thin liquidity rise in yields...



Source: Bloomberg

Nasdaq outperformed on the day but none of the majors were able to hold gains from the 1300ET close on Friday. Small Caps were the biggest loser...



VIX ended higher on the day with a 12-handle close for the 2nd day in a row...



Homebuilders dumped on the ugly housing data reality-check. But, of course, the BTFD crowd stepped in because rates were falling...



Bank stocks were sold today...



...perhaps as reality hits about the sudden recent re-accleration in demand for funds from The Fed's emergency bank bailout plan...



Source: Bloomberg

The dollar extended its recent trend lower...



Source: Bloomberg

And as the dollar dropped, spot gold prices accelerated higher, breaking back above $2000 to its highest since May...



Source: Bloomberg

Oil prices trod water today with WTI hovering around $75...



Gold's gain was crypto's loss today as Bitcoin slipped back to $37,000



Source: Bloomberg

Finally, financial conditions continue to loosen dramatically...



Source: Bloomberg

Will Powell use his speech this week to walk back this dovish overhang and re-engage the 'FCI Loop'?

Global liquidity suggests S&P's fair value is "lower"...



Source: Bloomberg

Which will it hit first - 5,000 or 3,600?

 

Waller Whacks The Dollar: Dovish Fed-Hawk Sparks Bid For Bullion, Bonds, & Bitcoin
TUESDAY, NOV 28, 2023 - 04:00 PM

Another day, another set of weaker data with Case-Shiller home-prices rising at their slowest rate since March, ugly downward revisions in the Conference Board consumer confidence data (and labor market weakness), and Richmond Fed Manufacturing and Dallas Fed Services showing anything but resilience as the temporary highs of Bidenomics' spending spree come crashing back to earth...



Source: Bloomberg

But it was FedSpeak that prompted initial movement today.

Historically one of the more hawkish Fed members, Governor Christopher Waller said he's encouraged by a recent slowing of economic activity, which may indicate the central bank’s policy is tight enough to contain inflation that still remains too high.

“I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%,” Waller said Tuesday in prepared remarks for an event at the American Enterprise Institute in Washington.

“I am encouraged by what we have learned in the past few weeks - something appears to be giving, and it’s the pace of the economy.”

Waller added that the recent slowdown in CPI was positive:

“This is encouraging, but it is not enough evidence to be sure it will continue,” Waller said.

“Just a couple of months ago, inflation and economic activity bounced back up, and the future was looking less certain.”

But Waller's comments essentially endorsing the Taylor Rule were the market mover - implying that when inflation cools, real interest rates should decrease - prompted a major bull curve steepening in TSY yields...



Source: Bloomberg

If inflation continues to cool for several more months, maybe three to five months, and US central bankers feel confident it's headed in the right direction, the Fed could lower the policy rate just because inflation is low, Waller told the audience in a question-and-answer session at the American Enterprise Institute.

Rate-cut expectations surged on the headlines (now pricing in 110bps of cuts in 2024)...



Source: Bloomberg

Of course, CPI's next print will drop on Thursday morning.

“The Fed is providing parameters for the potential of looser policy,” said Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities.

However, Waller did note (somewhat hawkishly) that "the recent loosening of financial conditions is a reminder that many factors can affect these conditions and that policymakers must be careful about relying on such tightening to do our job."



Source: Bloomberg

But, Fed Governor Michelle Bowman (another traditional hawk) is less sure about the progress being sustainable:

"We should keep in mind the historical lessons and risks associated with prematurely declaring victory in the fight against inflation, including the risk that inflation may settle at a level above our 2 percent target without further policy tightening," she said.

The US equity majors chopped around but a late-day short squeeze lifted The Dow, Nasdaq, and S&P into the green while Small Caps ended red...



"Most Shorted" stocks had a double-squeezey day today - first from the initial dip after the down-open and then after the 7Y auction...



Source: Bloomberg

VIX pushed down to a new cycle low around 12.60 before the 7Y auction triggered a massive spike above 14 (and back down)...



...not a fat finger.



Treasuries were aggressively bid from around 8amET with the short-end outperforming (2Y -12bps, 30Y -2bps). Since the close before Thanksgiving, the short-end is down 17bps (and 25bps from Monday's highs)...



Source: Bloomberg

10Y yields are down to almost 4-month lows (was 5.00% the top?)...



Source: Bloomberg

And the 2Y Yield hit 4-month lows...



Source: Bloomberg

The dollar was clubbed like a baby seal back to 4-month lows on the dovish narrative...



Source: Bloomberg

And as the dollar sank, gold jumped back above $2040, back up near record highs...



Source: Bloomberg

Bitcoin surged back above $38,000...



Source: Bloomberg

Oil prices ripped back higher after dropping on OPEC headlines with WTI back up to $77, erasing losses from last week...



Finally, given the decoupling between real-yields (surging higher) and gold prices, it would appear the precious metal is very much in play...



Source: Bloomberg

...and no, Sara Eisen, you don't need a weaker dollar for gold strength...



Source: Bloomberg

...but, of course, in the limit, that's where it ends.

 

Bullion, Bonds, & Black Gold All Bid As Rate-Cut Hopes Ramp-Up
WEDNESDAY, NOV 29, 2023 - 04:00 PM

Inflation down (in Europe) and Growth up (in US) prompted more 'goldilocks' narrative calls today.

But, as Goldman's Chris Hussey pointed out, 3Q GDP is in the rearview mirror, and the implications of the report (and other releases today) for 4Q GDP growth were not good. In fact, Goldman lowered their 4Q23 GDP growth forecast by 50bp to +1.4% today as the October trade and inventory reports - also released today - came in light and gross domestic income rose by only 1.5% in 3Q - well below the pace of GDP.

All of which pushed rate-cut expectations higher again (now 125bps of cuts priced in for 2024)...



Source: Bloomberg

...and the first rate-cut timing has now moved to May from June...



Source: Bloomberg

...and sent Treasury yields even lower on the week (once again led by the short-end, 2Y -9bps, 30Y -6bps)...



Source: Bloomberg

As we noted earlier, November is set to be bonds' best month since 2008 as 10Y and 30Y Yields are down a stunning 65bps...



Source: Bloomberg

Sadly, The Fed seems completely disconnected and stuck with its old narrative as SF Fed's Mester proclaimed that "broad tightening in financial conditions is helping curb demand". That may well have been true until you muppets started jawboning about how "the market is doing The Fed's job" and that you're near the end of the cycle. Financial conditions have massively loosened in the last month...



Source: Bloomberg

As stocks remain on pace for their 4th best month in the last 12 years, early gains into the cash open were gradually sold into with Nasdaq and S&P the biggest losers and Small Caps holding on to decnet gains despite late-day selling-pressure (ahead of tomorrow's PCE)...



'Most Shorted' stocks were squeezed again - up to recent resistance - and reversed modestly from there...



Source: Bloomberg

Meme stocks are soaring again as Goldman's 'Retail Favorites' hits a new cycle high...



Source: Bloomberg

...But, the 'Magnificent 7' stocks were lower overall with huge 0-DTE call-covering early and late...



Source: SpotGamma

The bull-steepening continued in bond-land with 2s30s up to -16bps on the day...



Source: Bloomberg

...as 2Y yields fell to their lowest since June...



Source: Bloomberg

The dollar managed gains on the day after 4 down days in a row...



Source: Bloomberg

Crypto was marginally lower on the day with Bitcoin



Source: Bloomberg

Gold prices continued their charge towards new record highs...



Source: Bloomberg

And notably, silver has started to outperform very recently, breaking above its downtrend relative to gold...



Source: Bloomberg

Oil prices pumped and dumped ahead of tomorrow's OPEC+ meeting (after increased production cut rumors trumped across-the-board inventory builds and record US production)...



Finally, we note that historically, spikes in geopolitical risk have driven higher volatility. But, as Goldman Sachs points out in a note today, the latest spike in risk has not been accompanied by a meaningful spike in the VIX...



Source: Goldman Sachs

Goldman clearly doesn't believe it's different this time and recommends taking advantage of the low level of volatility in both equities and 'safe assets' (ex bonds) to focus on hedges.

 

Mo'vember Marks Best Month For US Bonds In 40 Years; Global Markets Add Over $11 Trillion
THURSDAY, NOV 30, 2023 - 04:00 PM

Remember, remember, the surge of November...

Global bond and stock markets added over $11 trillion in capitalization in November. That is the second biggest monthly gain in history (Nov 2020 added $12.5 trillion)...



Source: Bloomberg

Who could have seen that coming?

Global bonds had their best month since Dec 2008 with US bonds soaring to their best month since May 1985...



Source: Bloomberg

...and back into the green for the year...



Source: Bloomberg

For context, that is a 60bps or so collapse in yields for Treasury bonds on the month (with the short-end underperforming)...



Source: Bloomberg

Despite bull-steepening in the last few days, the yield curve (2s30s) is flatter (more inverted) for the second straight month...



Source: Bloomberg

“There’s a little bit of the fear of missing out,” said Ed Al-Hussainy, a rates strategist at Columbia Threadneedle Investment.

“Suddenly 5% yields on the 10-year Treasury have become a distant memory.”

No fear here in stock-land as all the US majors rallied almost non-stop (up around 8-10% on the month) led by Nasdaq...



Source: Bloomberg

Random but interesting... the sales per employee in the Russell 2000 (where people expect job cuts) has never been higher.



The energy sector was the only one to end the month red while Tech and Real Estate were the big winners...



Source: Bloomberg

And VIX plunged to a 12 handle - its biggest absolute monthly decline since Nov 2022...



The rally in bonds and stocks sent financial conditions dramatically looser...



Source: Bloomberg

In fact, October saw the biggest absolute monthly loosening of financial conditions in history (back to 1982)...



Source: Bloomberg

The dollar index tumbled 3% in November - its biggest monthly decline since Nov 2022 (and 2nd biggest since July 2020). Note that today's bounce ripped up to its 200DMA and stalled...



Source: Bloomberg

Bitcoin rallied for the 3rd month in a row, back above $38,000...



Source: Bloomberg

Ethereum soared over 12% in November - its best month since March and its first monthly outperformance of BTC since May - but as is obvious from the chart, it has stalled since the early surge...



Source: Bloomberg

Gold rallied for the 2nd straight month, back up to record highs...



Source: Bloomberg

Silver also soared back above $25...



Source: Bloomberg

Oil prices fell for the second straight month, with WTI finding resistance at the 200DMA for the last week (including a stop-run that failed today)...



Source: Bloomberg

Finally, November was truly a month of "bad news" being "good news" for stocks...



Source: Bloomberg

'Hard' data hits a 14-month low as stocks surge back near record highs.

“We’ve been getting economic data recently that reinforces the idea of the Goldilocks slowdown,” said Rebecca Patterson, former chief investment strategist at Bridgewater Associates.

“Inflation is coming down, and at the same time it hasn’t been unduly impinging growth.”

But be careful what you wish for - if financial conditions loosen much more, The Fed will be forced to jawbone some reality back into market as November saw the biggest increase in rate-cut expectations for 2024 since Nov 2022.



Do investors really think anything but a NOT-soft-landing would spark 5 x 25bps rate-cuts in an election year!

 

Powell Comments Send Everything Soaring, Gold Hits All Time High As Dollar Plummets As Market Prices In Rate Cuts
FRIDAY, DEC 01, 2023 - 04:07 PM

After November's furious meltup, which saw the S&P rise by 9% (the Nasdaq was up an even more ludicrous 11%), which was the best November for the stock market since 1980...



... all eyes were on Jerome Powell today to see if the Fed chair would say something to stem the surging stock market tide following the month which saw the biggest easing in financial conditions on record, equivalent to nearly 4 rate cuts.




We got the answer shortly after 11am ET, when after what seemed to be otherwise balanced remarks with a dose of hawkish comments...

"It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so."

... offset by some clearly dovish statements...

"The strong actions we have taken have moved our policy rate well into restrictive territory, meaning that tight monetary policy is putting downward pressure on economic activity and inflation. Monetary policy is thought to affect economic conditions with a lag, and the full effects of our tightening have likely not yet been felt."

... and generally sounding rather optimistic while answering student questions, saying that the US is on the path to 2% inflation without large job losses - i.e., a soft landing - which helped the market to convince itself that Powell had just given the green light for a continued market meltup (thanks to the blackout period, there will be no more Fed comments until the Dec 13 FOMC) as Bloomberg put it...

"Powell points to how the Fed’s past tightening moves will continue to have an impact on the economy -- the full impact hasn’t been felt yet. If anybody thought the Fed wasn’t finished raising rates, his prepared remarks today sure put a fork in it. They are done."

.... and what happened next was a violent repricing in easing odds, with March rate cut odds hitting a lifetime high of 80%, effectively doubling overnight and up from 10% just 5 days ago...



... which then immediately cascaded across assets and sent everything exploding higher, led by stocks which surged above 4,600 for the first time since the July FOMC (aka the "final rate hike")...



... and one look below the surface reveals that this was indeed the QE trade: the Nasdaq barely rose while meme stonks and most shorted names exploded higher.



And yet, this eruption in the most shorted/hated names means that hedge funds actually had a catastrophic day: and indeed, looking at the HF VIP (most long) less most shorted basket pair trade we see a whopping 5% drop as many hedge funds were stopped out and margin called.



Putting today's plunge in contact, this was the worst day for hedge funds since June 2021 and the second worst day since the covid crash!



Next, looking at the bond market, here too everything jumped but especially 2-Year TSYs, whose yields tumbled a whopping 12bps to 4.56%...



... and on course for the biggest weekly slide since the regional banking crisis in March, down almost 40bps.



Yet neither stocks, nor bonds, had quite as much fun as either "digital gold", with Bitcoin briefly hitting a fresh 2023 high, briefly surging to $39,000 before easing back with Ether rising to $2100 ...



... but the biggest winner by far from today's market conclusion that a renewed dollar destruction is on deck, was gold which briefly rose above its all time high of $2,075...



... and that's just the start: now that a new record is in the history books, a frenzy of gold calls was bought, both for futures and the biggest ETF tied to the metal, and as shown in the chart below, the buildup of open interest between $2,000 and $2,500 has been relentless over the past week on growing optimism that rates are primed to decline. Next up for gold? $2500 or higher.



Yet not everyone had a great day: the dollar predictably tumbled, extending it losses for a third straight week, the longest streak since June, and comes after the dollar saw its worst month in a year this November.



One dollar pair trade where the convexity is especially high is USDJPY, which after soaring for much of the past year suddenly finds itself in a Wile E Coyote moment, trading just below the 100DMA. Should the selling persist, we may see the pair quickly tumble down to 140, or lower.



To be sure, not all the moves made sense: as Bloomberg noted, bonds have a better reason to rally than stocks, which have to factor in the growth concerns that underpin Powell’s remarks. Evidence is gathering that the economy is slowing and stocks will have to reconcile that with their bullish rate views. Today’s ISM Manufacturing data is case in point that the stagflationary slowing that started in October — and Bloomberg Economics says it’s observing typical early signs of recession — extended last month.



The ISM commentary was generally downbeat, equally split between companies hiring and others reducing their labor forces "a first since such comments have been tracked" according to Bloomberg.

But it gets worse: the latest update to the Atlanta GDPNOW tracker slipped to 1.2% from 1.8% yesterday and over 2% just last week.



And after diverging for much of the year, all three regional Feds that do GDP nowcasts have converged on 2% - a far cry from the "5.2%" GDP print the Biden department of seasonal adjustments goalseeked last month.



Bottom line: the onus is now on the payrolls report next week to further guide markets into next year. The continued rise in ongoing jobless claims pose a risk that unemployment could rise further. But so far, this isn’t a consensus view, with economists projecting the unemployment rate to stay unchanged at 3.9% (and more see a 3.8% rate than 4%).

And while that may only add more fuel to the rate-cut speculation, at some point the softening in economic data will have to be squared with its impact on profits. As a reminder, while much of the interval between the last rate hike and the first rate cut is favorable for risk assets, the weeks right before the cut usually send stocks anywhere between 10% and 30% lower as the market realizes just why the Fed is panicking.

However, judging by today's action, we still have some time before that particular rude awakening kicks in.

 

Bitcoin Overtakes Berkshire, Gold Dumped Off Record Pump, Bonds & Big-Tech Slump
MONDAY, DEC 04, 2023 - 04:00 PM

Another day, another set of shitty data dragged US macro surprise index down to lowest since May...



Source: Bloomberg

And before today's surge in the dollar and bond yields, financial conditions had dramatically eased to their loosest since early August...



Source: Bloomberg

But - the big story of the day was bitcoin and bullion.

Bitcoin ripped back above $42,000 for the first time since April 2022 - erasing all the TerraUSD/3AC crisis losses from last year...



Source: Bloomberg

That pushed Bitcoin's market cap above that of Berkshire Hathaway (as Munger turns over in his grave)...



Source

Gold hit a new (nominal) record high overnight at $2135...



Source: Bloomberg

...but shortly after that the selling began as Benoit was called in...

...within the next 8 hours, spot gold prices had dropped $115 from its intraday highs...



Source: Bloomberg

...that is the 6th biggest absolute $ intraday drop in the history of spot gold trading (9/23/11 & 9/26/11 (SNB intervention as gold soared near $2,000), 04/15/13 (taper tantrum), 3/16/20 (COVID lockdowns), 08/11/20 (vaccines))...



Source: Bloomberg

Bonds dumped most of Friday's pump with yields up across the curve. The short-end underperformed on the day(2Y +11bps, 30Y +4bps)...



Source: Bloomberg

2Y yields are up around 14bps off Friday's lows...



Source: Bloomberg

Huge divergences in equity-land as long-duration (tech) underperformed as yields rose but Small Caps soared (short-squeeze) with The Dow scarmbling to unch on the day and S&P weak...



Unprofitable Tech stocks continue to outperform the Magnificent 7, with the latter now back at support levels seen in the early summer relative to the unprofitable names...



Source: Bloomberg

The dollar ripped higher today (no manipulation of gold of course) for its best day in almost two months...



Source: Bloomberg

Oil prices were lower on the day (as the dollar soared) with WTI finding support around $73 and chopping around there all day...



Finally, after spending July thru Oct starting to recouple with liquidity's reality, US equities exploded divergently in November...



Source: Bloomberg

What happens first - major central bank liquidity expansion... or a crash in stocks?

 

Lousy Labor Data Sends Yields Lower; Bitcoin, Big-Tech, & The Buck Soar
TUESDAY, DEC 05, 2023 - 04:00 PM

The post-November-FOMC plunge in US macro data continued today with bloodbathery hitting the labor market (JOLTs tumbled) but ISM Services beat providing another glimpse at 'Goldilocks' (especially with prices paid moderating too)...



Source: Bloomberg

The 'bad' news in JOLTs sparked a bid in bonds with the long-end outperforming (30Y -10bps, 2Y -5bps). The 10Y and 30Y yield is now below Friday's lows while the 2Y yield remains above Friday's lows...



Source: Bloomberg

...which flattened (further inverted) the yield curve (2s30s)...



Source: Bloomberg

Financial Conditions continue to loosen more and more dramatically - prompting some to fear this will force The Fed to act more hawkishly to reassert any sense of restrictive policy here...



Source: Bloomberg

And lower yields are 'good' news for long-duration stocks as after four straight down days, the 'Magnificent 7' stocks surged higher today...



Source: Bloomberg

That rally managed to pull Nasdaq green on the day and leave S&P unchanged. Small Caps were the biggest loser, down over 1% after 4 straight days higher...



Apple's market cap topped $3 trillion once again (the first time in four months)...



Source: Bloomberg

Bitcoin surged above $44,000 today - its sixth straight day higher...



Source: Bloomberg

...retracing half of the decline from the Nov 2021 to Nov 2022...



Source: Bloomberg

What happens next? Nobody knows but it looks a lot like 2020 for now...



Source: Bloomberg

Notably, while ETH also rallied (topping $2300), it notably underperformed BTC as the SEC delayed its decision on the Ethereum Spot ETF...



Source: Bloomberg

The dollar rallied for the second day in a row to two-week highs...



Source: Bloomberg

Gold (spot) leaked lower again after yesterday's record high spike back to around one-week lows..



Source: Bloomberg

Oil prices slipped lower again, back to mid-Nov lows with WTI hovering above $72 ahead of tonight's API inventory data...



Source: Bloomberg

Finally, 'Cyclical' stocks have completely decoupled from the macro environment and oil market (with the latter agreeing on growth fears while for former have no fears at all)...



Source: Bloomberg

We bring this up because Goldman's Bobby Molavi noted: "Another dynamic that worries me is the dislocations between leading indicators and market weighing machine."

Corporates are increasingly pointing to softer consumer data and a weakening environment. We’re seeing that in a broad based manor through earnings (eg Mitchells and butler) but markets, at least at headline level, are shrugging this off. It sort of highlights the reality that the market is less of a pricing vehicle for the economy than it once was…as banks, industrials, oils, miners shrink as a share of the global markets in relation to tech, healthcare and luxury…

...we move towards a index’s that may be driven by fewer stocks (obvious statement i know given magnificent 7) but also perhaps less cyclical and less of leading indicator of the state of the economy.

Especially when all that matters is 'liquidity'...



Source: Bloomberg

Is this trend set to continue? Is this why gold and crypto is flying once again?

 

'Growth Scare' Spooks Big-Tech & Black Gold As Bond Yields Plunge
WEDNESDAY, DEC 06, 2023 - 04:00 PM

Macro data continues to serially disappoint, with ADP today confirming labor market stress is starting to build...



Source: Bloomberg

Treasuries were mixed with the long-end dramatically outperforming (30Y -8bps, 2Y +2bps). On the week, only 2Y yields are higher with 5Y unch and the rest of the curve lower...



Source: Bloomberg

...pushing the yield curve flatter/more-inverted...



Source: Bloomberg

...as the bond market is starting to price in a growth scare as long-end yields tumble to their lowest since August...



Source: Bloomberg

Here are five reasons why:

1. Today’s November ADP report was below estimates at 103,000 and showed job cuts in manufacturing. That was in line with Tuesday’s slowing in JOLTS job openings.
   
   
2. Traders ramped up bets on ECB rate cuts next year after weak German factory data bolstered the view that it’ll be the first to pivot.
   
   
3. Walmart CEO said consumers may not be as resilient next year, even as deflation starts to show, according to a CNBC interview.
   
   
4. Oil is moving lower on surging oil exports and as pessimism outweighs stockpile drop.
   
   
5. Treasuries sliced through resistance with dealers and international real money buying in long-end Treasury futures ahead of expected money manager demand after next week’s FOMC. Fixed income option flows too remain bullish — skewed towards call structures that target 2% Fed rate by September.

Goldman reassures that "slowing but no recession, disinflation without job losses is what is being priced into the equity markets."

'Growthy' Cyclical stocks remain high as macro and commodities are non-growthy...



Source: Bloomberg

'Magnificent 7' stocks faded an initial rally today (despite lower yields)...



Source: Bloomberg

..but 'unprofitable tech' continues to rally (on lower rates)...



Source: Bloomberg

...as 'most shorted' stocks squeezed higher and hedge fund VIP holding were weaker - punishing them twice...



Source: Bloomberg

But, the last hour saw broader selling pressure which smashed the squeeze back down to unch...



Source: Bloomberg

...and that dragged Small Caps down into the red with the rest of the US Majors today. Nasdaq and S&P were the ugliest horses in the glue factory...



The dollar strengthened against its fiat peers for the 5th time in the last 6 days (closing at 3-week highs)...



Source: Bloomberg

Bitcoin held yesterday's gains, hovering around $44,000 all day...



Source: Bloomberg

Ethereum was lower on the day, dragging the ETH/BTC cross to its lows in June...



Source: Bloomberg

Gold inched higher (with spot prices finding support at $2020)...



Source: Bloomberg

Oil tumbled for the fifth straight day (8 of last 10 days) with WTI tumbling back below $70 for the first time since early July. Most notably, prices are back below the levels that triggered OPEC+'s big coordinated production cuts in March...



Source: Bloomberg

Finally, financial conditions continue to loosen...



Source: Bloomberg

When will The Fed be forced to intervene as 'the market' erases all its hard work?

 

'Japanic Attack': Dollar Dumps On Yen Strength, Big-Techs Rip Ahead Of Buyback Blackout
THURSDAY, DEC 07, 2023 - 04:00 PM

For a change, the big moves were in FX-land today... and oh my, the irony that Japan would spark the market chaos on this 'infamous day'.

USDJPY dumped overnight after shockingly hawkish comments from BoJ officials hinting at the end of NIRP. That tumble then morphed into a flash crash as it broke 144 (instantly slammed to a 141 handle)...



Source: Bloomberg

...but despite the bounce back, it was still an ugly day and USDJPY broke its 2023 trendline (inverted to show JPY strength upwards in chart)...



Source: Bloomberg

At the same time, Swissy stormed to new highs (before the Japanic hit the dollar). But overall, the franc has been a one-way train against its European peers for decades...



Source: Bloomberg

All of which meant the dollar was clubbed (lower) like a baby seal (biggest intraday drop in three weeks)...



Source: Bloomberg

Magnificent 7 stocks soared higher today (after 5 down-days in the last 6), thanks in large part to GOOGL's biggest daily gain since July (on another AI chatbot). This surge also comes ahead of tomorrow's start of the buyback blackout window...



Source: Bloomberg

That surge smashed Nasdaq and S&P higher (but all the majors ended green). The S&P and Dow snapped a three-day losing streak...



Interestingly, this is the first day in December that "AI-favored" names have outperformed "AI-at-risk" names...



Source: Bloomberg

But, Anti-Obesity drug names have been December's losers as 'Pro-Obesity' stocks (not sure if that's the best way to describe them) have rallied...



Source: Bloomberg

VIX was marginally higher ahead of tomorrow's payrolls data (despite stocks being up) but it was 0-DTE Vol that did the usual spike above 'VIX' ahead of an event...



Source: Bloomberg

Treasuries were mixed today with the short-end outperforming (2Y -1bp, 30Y +4bps). 2Y yields remain the only part of the curve higher on the week with 30Y yields down around 15bps...



Source: Bloomberg

Ethereum outperformed Bitcoin (for a change) today (hitting $2350 - highest since May 2022)...



Source: Bloomberg

This pushed ETH total market cap above that of Adobe and Chevron...



...with the ETH/BTC cross bouncing off serious support...



Source: Bloomberg

Gold continued to tread water in a tight range (despite the dollar dump), with spot prices still holding above $2020...



Source: Bloomberg

After 5 straight days lower, oil prices managed a gain today (albeit very marginal) as WTI desperately trying to hold on to $70 handle...



Source: Bloomberg

Finally, some good news... maybe? Mortgage rates have plunged for a sixth straight week, now at their lowest level since August...



Source: Bloomberg

Time for another home-buying-panic?

But the divergence between stocks, commodities, and macro continues to widen...



Source: Bloomberg

Who will be right on 'growth'?

 

Cryptos Jump, Commodities Dump, & Yield-Curve Slumps In 'Goldilocks' Week
FRIDAY, DEC 08, 2023 - 04:00 PM

Reality set in this week that the 'goldilocks' narrative is not compatible with the massive rate-cuts priced-in for next year.

As Goldman warned:

"...it may be hard to justify more than 75bp of cumulative easing without weaker growth. A recession could clearly motivate a much deeper easing cycle, but a high weight on that outcome is not consistent with other asset prices, or with our own central case.

...

For that reason, the market is moving into territory where we think it will become more difficult for US rates to rally unless the growth picture deteriorates more than we, and other markets, expect.”

Stocks mixed-ish, Bonds mixed-ish, Commodities down, Crypto up, & Dollar up as Rate-Cut hopes faded this week (from 140bps in 2024 to 112bps)...



Source: Bloomberg

On the macro side - it was all 'soft' with a little firming in 'hard' data: Inflation expectations (survey) down along with gasoline, Services (survey) data up, labor market mixed (JOLTS weak but unemployment lower), consumer sentiment (survey) soars, and geopolitical risk mixed (US pressures Israel for ceasefire but military action in Yemen looms).



Source: Bloomberg

Good news, bad news, no news; Didn't matter as stocks chopped around wildly squeezing and un-squeezing this week. Small Caps and Mega-Cap tech outperformed while The S&P managed to get green for the week but The Dow struggled all week...



Every time The Dow got green on the week, selling pressure hit...



The S&P 500 closed at its highest since March 2022...



...and Nasdaq at its highest close since January 2022...



A chaotic week for 'most shorted' stocks, crashing up and down like a whore's drawers...



Source: Bloomberg

After an ugly open on Monday, Magnificent 7 stocks soared 4.5% off the Monday lows, back up near record highs...



Source: Bloomberg

All of which meant hedge funds got it from both ends unable to escape from Friday's carnage...



Source: Bloomberg

Energy stocks were the week's biggest losers while tech and discretionary outperformed...



Source: Bloomberg

We couldn't help but laugh at the surge in regional bank stocks - now back up near post-SVB highs - while their use of the expensive BTFP bailout facility at The Fed surged to a new record $122BN...



Source: Bloomberg

Treasuries were mixed on the week with the short-end underperforming. Only the long-bond managed to close the week higher in price (lower in yield)...



Source: Bloomberg

Which pushed the yield curve significantly flatter (more inverted). This was the biggest weekly flattening since Nov 2022 to its most inverted since Sept....



Source: Bloomberg

The dollar surged higher this week (after three straight weeks down) ...



Source: Bloomberg

Cryptos were all higher this week with Solana outperforming. BTC and ETH were each up around 13%...



Source: Bloomberg

Bitcoin ripped up to $44,000 (its highest since April 2022)...



Source: Bloomberg

Ethereum neared $2400 (its highest since May 2022)...



Source: Bloomberg

Commodities were all lower with Silver clubbed like a baby seal, NatGas ugly, Oil & gold were sold, and copper was the least ugly horse in the glue factory...



Source: Bloomberg

Spot Gold fell back to $2000 today



Source: Bloomberg

Gold's outperformance pushed the gold/silver ratio back to the upper end of its range this year (from the lower end)...



Source: Bloomberg

Oil prices rallied today, ending a 6-day losing streak. WTI found support at $70 (5-month lows)...



Source: Bloomberg

Finally, which comes first - the equity market collapse or global central bank balance sheet explosion?



Source: Bloomberg

Our money's on the former and then the latter and the two meeting in the middle before melting up.

 

Bitcoin, Big-Tech, & Bullion Dumped Ahead Of CPI
MONDAY, DEC 11, 2023 - 04:00 PM

Today's calm - before the storm of event-risk-catalysts this week - was anything but.

Bitcoin was clubbed like a baby seal, Black Gold dumped and pumped, 'Magnificent 7' stocks stumbled, gold was hammered, and NatGas puked. Bonds were quiet (yields small higher) and the dollar rallied modestly.

Bitcoin made the most headlines today as it saw large long liquidations overnight and then was punched in the mouth by Lizzy - blaming it for everything wrong in the world.



Source: Bloomberg

All of crypto suffered (with long-liquidations over $450mm)...



Source: Bloomberg

Bitcoin-linked stocks were (expectedly) hammered but the rest of the 'retail' faves were left relatively unharmed (for now)...



Source: Bloomberg

The US Majors were all higher on the day ahead of tomorrow's inflation print with Nasdaq outperforming (Small Caps lagged). The big gains all happened after Europe closed and into 1430ET (margin-call time)



But, while Nasdaq rallied, the biggest of the big-tech (Magnificent 7) stocks tumbled by the most since Oct 26th...



Source: Bloomberg

The wild-chop in "most shorted" stocks continued today...



Source: Bloomberg

Hedgies continued to drift sideways as favorite shorts and longs refuse to breakout...



Source: Bloomberg

Bonds roller-coastered today - ending with yields modestly higher. Bonds were sold overnight and through the 3Y auction but then rallied after the 10Y auction. The long-end underperformed (30Y +2.5bps, 2Y unch)...



Source: Bloomberg

The 2Y yields spiked over 20bps from Thursday night to today's highs before pulling back a little...



Source: Bloomberg

The dollar managed to hold gains after running stops above last week's highs and then fading back....



Source: Bloomberg

Oil managed to eke out a small gain today...



...while warm-weather whacked NatGas to 5-month lows before bouncing back today (still down over 5%)...



Spot Gold broke below $2,000, back to three-week lows...



Source: Bloomberg

Finally, since the last FOMC meeting, financial conditions have eased massively (by over 100bps based on Goldman's FCI)...



Source: Bloomberg

And, as we detailed earlier, there's a lot of room for disappointment in this week's FOMC as the market is pricing in the fact that every Fed member has to be wrong about next year...



Source: Bloomberg

Mr Market says “I do not believe you!” to the Fed. Now, what will Powell say back?

 

'All Greed, No Fear' Ahead Of Fed: VIX Hits 4-Year Low As Crude Carnage Continues
TUESDAY, DEC 12, 2023 - 04:00 PM

The market appears to be calling 'Powell the Pusillanimous' bluff by rallying fearlessly (and selling vol unabashedly) into tomorrow's FOMC (and Dot-Plots) meeting.

He wouldn't dare stomp on the massive easing in financial conditions, right?



Source: Bloomberg

Or admit the economy is not doing so great?



Source: Bloomberg

Or admit that the 'trend' in CPI is disinflationary? (cough today's SuperCore CPI bounced back above 4.00%)...



Source: Bloomberg

For now, the market remains of the opinion that every Fed member will be wrong about monetary policy next year - the question is: how many of those Fed 'dots' will sheep-like move to the market's demands, or stay firm 'higher for longer' to stamp out inflation for good?



Source: Bloomberg

The disconnect between stocks and commodities in a weaker macro-environment is growing wider and wider as cyclical stocks (growthy) soar while cyclical commodities - Oil - plunge...



Source: Bloomberg

Who's right? Or are they both right? Oil has priced in the recession and stocks have priced in the post-recession QE.

VIX was clubbed like a baby 'fear' seal back to an 11 handle...



...basically its lowest post-COVID close...



Source: Bloomberg

The vol-selling helped fuel more gains in stocks, led by Nasdaq. Everything accelerated higher after 1pmET. The last 30 mins of the day saw some profit-taking which dragged Small Caps into the red...



A solid 30Y auction appeared to trigger a massive buy program in stocks (at around 1pmET)...



Source: Bloomberg

After the massive short-squeeze on Dec 1st, the 'most shorted' stocks basket has chopped sideways unable to extend or reverse its trend (helped by the vol-crushing surge in long gamma)...



Source: Bloomberg

Treasuries were mixed today with the long-end outperforming (30Y -2bps, 2Y +2bps). This recoupled the wings (2Y and 30Y) as the belly is outperforming on the week...



Source: Bloomberg

The 30Y yield tested Friday's lows, ramped almost 10bps on the CPI print and then faded back after the strong auction...



Source: Bloomberg

Despite a little hawkish pullback this week, the trend remains very dovish for next year (with 115bps of rate-cuts priced in)...



Source: Bloomberg

CPI sparked a kneejerk higher in the dollar (briefly into the green on the day) before fading back to red...



Source: Bloomberg

Bitcoin saw resistance at $42,000 once again and faded back today...



Source: Bloomberg

Spot Gold rallied intraday (but was unable to get back up to $2000) before fading back to $1980...



Source: Bloomberg

Oil prices puked again today, with WTI breaking below last week's lows ($68 handle)...



That is basically the lowest level in the last two years and has historically been a significant support level...



Source: Bloomberg

Finally, as a reminder, the dramatic easing of financial conditions has erased all of The Fed's rate-hike pressures since June 2022...



Source: Bloomberg

Is that really what The Fed wants?

 

Powell "Pivots", Sends Dow To Record High With Election-Year Rate-Cut Projection
WEDNESDAY, DEC 13, 2023 - 04:00 PM

Did Powell get a 'Biden-esque' tap on the shoulder?



The Dow hit a new record high after The Fed signaled - via its 'dot plot' - that it has pivoted from a pause, dovishly delivering what the market was pricing in (and Powell didn't even get close to trying to walk back the exuberance)...



Source: Bloomberg

But while The Dow hit record highs, it was a bloodbath for hedgies today...



The worst day for hedgies since June 2021...



Source: Bloomberg

It seems like the last 30 minutes saw some nasty moments...



Source: Bloomberg

Fed Chair Powell said absolutely nothing about the massive easing of financial conditions (the tightening of which was the reason for them to pause at the September meeting).



Source: Bloomberg

And then pivoted to a major rate-cut trajectory for 2024 (election year).

• In Sept, 5 Fed members expected three cuts or more
  
  
• In Dec, 11 Fed members expect three cuts or more.

Source: Bloomberg

Of course, Powell explained, when asked about the election year:

"We don't think about political events, we just can't do that" as he frontloads rate-cuts (from 2025) ahead of 2024 presidential elections.

As The Fed shifted dovishly towards the market, the market shifted even more dovishly - now pricing in 150bps of rate-cuts in 2024 (an election year) - bringing forward the cuts from 2025 (a non-election year)...



Source: Bloomberg

However, amid all the excitement, on a real rate basis, The Fed's policy restriciveness will be basically unchanged by the end of next year IF their inflation and rate forecasts are met

Bonds ripped higher (in price) with the short-end outperforming (2Y -27bps, 30Y -12bps)



Source: Bloomberg

The 2Y Yield plunged over 30bps from the intraday highs - the largest daily drop since the SVB crisis in March. Other than that, you have to go back to the GFC (2008) to see moves like this...



Source: Bloomberg

Interestingly, 10Y Yields tumbled to 4.00% and found support there (which stalled stocks)...



Source: Bloomberg

The yield curve (2s30s) massively bull-steepened...



Source: Bloomberg

Is 4.00% 10Y the 'fear' level that prompts equity bulls to lose faith in the soft-landing/goldilocks narrative? Stocks were on a roll though and closed near their highs with Small Caps up 3.5% and the rest of the majors up around 1%



The Fed triggered the biggest stock-buying program since Nov 2022...



Source: Bloomberg

This was the second biggest short-squeeze in stocks since Nov 2022...



Source: Bloomberg

The Magnificent 7 stocks did not exuberantly participate in the yield-collapse the way you think they should have...



Source: Bloomberg

But retail faves are #winning...



Source: Bloomberg

Meanwhile, over in Homebuilder fantasy-land - new highs as the housing market collapses 'because, hey, The Fed will slash rates next year, right'... except the only thing that will drive that kind of a massive sudden rate cut is a massive sudden recession... which is not good for homebuilders...



Source: Bloomberg

The dollar puked to late November lows...



Source: Bloomberg

Bitcoin ripped up towards $43,000...



Source: Bloomberg

Gold soared over $40, back above $2,000...



Source: Bloomberg

Oil prices rallied (WTI back above $69) but were relatively subdued compared to the rest of markets...



Finally, VIX remains extremely low, but, as Goldman highlighted today, it should be 5-8 points higher based on recent economic data...



As they said: We believe that index options prices are much lower than they should be; however, volatility tends to decline at this time of the year, making it difficult to recommend buying VIX.

 

Crude Oil, 'Crap Stocks', & Credit Soar Amid Hedge Fund Carnage Ahead Of "Largest OpEx In History"
THURSDAY, DEC 14, 2023 - 04:00 PM

Where to start...

• US Macro is surging
  
  
• The S&P is incredibly overbought
  
  
• Hedge Fund bloodbath accelerates
  
  
• Massive (Record) OpEx tomorrow
  
  
• 160bps of rate-cuts now priced in for 2024
  
  
• Financial Conditions "loosest" since June 2022

The rest is more of the same - dollar puking, bonds soaring (yields plunging), gold and bitcoin higher, and oil spiking.



US Macro data continues to 'beat' (paging six-rate-cuts in the dot-plot) in direct opposition to Powell's pivot to uber-dove...



Source: Bloomberg

...which smashed Financial Conditions to their loosest since June 2022...



Source: Bloomberg

And the market saw its inch and took a mile, now daring The Fed with 160bps of cuts priced-in for 2024...



Source: Bloomberg

Hedgies have been humbled with a massive 12% plunge in the last two days as their favorite longs have underperformed and their biggest shorts have been squeezed massively higher...



Source: Bloomberg

The biggest 2-day drop since Jan 2021...



Source: Bloomberg

The dash for trash is evident as MAG7 stocks become a 'source of funds' to chase 'crap' stocks...



Source: Bloomberg

And all of this is happening with gamma at record highs...



And tomorrow is on course to become the largest OpEx in history for $SPX/ $SPY linked contracts, with a staggering $3.1 trillion in notional Open Interest scheduled to expire this Friday.



SPX is nearing the most overbought level (RSI >70) in well over a decade...



47% of the S&P 500 members are overbought after yesterday's surge - the most since Feb 1991...



Source: Bloomberg

Small Caps are up - wait for it - over 7% since 1400ET yesterday when the 'Powell Pivot' hit. The rest of the majors are up around 1-2%...



But hey... it was easy really...



And if The Fed really wants to stomp on the tightening throat of real yields then S&P 500 P/Es are going back to the moon...



Source: Bloomberg

VIX was steady ahead of OpEx (with a 12 handle) as credit spreads (IG and HY) crashed)...



Source: Bloomberg

Bonds extended their price gains and yield declines with the short-end outperforming (2Y -34bps, 30Y -27bps this week)...



Source: Bloomberg

...with 2s thru 7s now all lower on the year...



Source: Bloomberg

The 10Y Yield tumbled back below 4.00% (and 30Y dropped to 4.02%), its lowest since July...



Source: Bloomberg

The dollar extended yesterday's plunge for the biggest 2-day drop since July...



Source: Bloomberg

Bitcoin and Gold extended gains as real yields fell today...



Source: Bloomberg

Palladium also exploded higher, up almost 12% (the biggest daily jump since March 2020)...



Source: Bloomberg

Oil extended its rebound with WTI back above $72...



...that is not at all what The Fed will want to see if it is really going to stick to its plan of slashing rates.

Finally, are we here?



...and how long before Powell resigns?

In the first half of the year we had recession fears which priced in an increasing number of rate cuts for next year (and saw Biden's approval decline)... then Aug-Oct we saw the economy appear to improve and rate-cuts were removed optimistically, but amid that optimism in the market, Biden's approval rating continued to decline...



Then December hit and Biden approval collapsed... triggering markets to suddenly price in a massive rate-cut shift next year

Does make one wonder.

 

FedSpeak Pushes Back On Powell 'Pivot' Panic-Bid In Bonds & Stocks
FRIDAY, DEC 15, 2023 - 04:00 PM

Powell "pivoted" and everything exploded (bonds, stocks, rate-cut expectations, gold, oil, and crypto) as the dollar dumped.



The result was a $2 trillion rise in the value of US aggregate bonds and stocks in the last three days and over $7 trillion since the start of November (the prior FOMC)



Source: Bloomberg

And world equity and bond markets added $4 trillion this week alone, and are up over $15 trillion since the November FOMC...



Source: Bloomberg

It appears the exuberance was a little too much and three separate Fed heads were unleashed to tamp down the 'animal spirits'... and fight the Fed's dots.

Just how excited?

The market immediately priced-in almost 7 rate-cuts for 2024...



Source: Bloomberg

The S&P 500 is up 7 weeks in a row - its longest winning streak in six years (Nov 2017)



49% of the S&P 500 members are 'overbought' after Powell and his pals "rang the bell" this week on rates. That is the most 'overbought' breadth since Feb 1991...



Source: Bloomberg

And it only took 48 days for the small-cap Russell 2,000 to go from 52-week low to 52-week high; the shortest turnaround in the index’s 45+ year history...



Source: Bloomberg

So Williams, Bostic, and Goolsbee were unleashed.



Fed's Williams sparked chaos early on by directly contradicting Chair Powell's uber-dovishness by saying that "we aren't really talking about rate cuts right now."

"I just think it's just premature to be even thinking about (rate cuts)," he added when asked about cuts in March, warning that inflation is not dead...

"One thing we've learned even over the past year is that the data can move and in surprising ways, we need to be ready to move to tighten the policy further, if the progress of inflation were to stall or reverse."

Later in the day, Fed's Bostic also came out considerably less dovish, suggesting just two rate-cuts in 2024, and likely after Q3.

“I’m not really feeling that this is an imminent thing,” Bostic was quoted by Reuters as saying.

Policymakers still need “several months” to see enough data and gain confidence that inflation will continue to fall, Bostic said, according to Reuters.

Fed's Goolsbee was dovish, but also less so than the market and the dots, saying that he expects rates to be lower next year than they are right now, but not significantly, warning that "as inflation comes down, we've got to think about how restrictive do we want to be and are there dangers on the employment side of the mandate."

"We should be prepared to raise rates if we stop getting good news and it looks like we're not on path to get down to" the Fed's target, Goolsbee said.

"But also if we see inflation going down more than we expected, we should be prepared to recognize whether that level of restrictiveness that we're at now, which is clearly restrictive, whether that's appropriate and whether we should loosen" policy.

The result of all that - March rate-cut expectations tumbled from 100% to around 66%...



Source: Bloomberg

Gold gave back some of its dovish gains...



Source: Bloomberg

The dollar stopped its freefall...



Source: Bloomberg

And the massive 'short squeeze' stalled...



Source: Bloomberg

Which helped wipe some of the lipstick off Small Caps (which were up almost 8% at one point). The rest of the majors were up 2-3% on the week. Nasdaq closed at a record high for the first time since Nov 2021.



The S&P and Dow were dragged green on the day in the last few minutes and then in the last few seconds, AAPL got his from headline about China's iPhone ban being more widespread...



AAPL is down 1% after hours...



The dash-for-trash accelerated this week with MAG7 stocks used as a 'source of funds' to buy profitless tech...



Source: Bloomberg

Despite the gains, L/S hedge funds were clubbed like baby seals this week as their favorite shorts were face-ripped higher and favorites longs lagged as the dash-for-trash accelerated...



Source: Bloomberg

Treasury yields collapsed on the week with FedSpeak prompting a little chop today but clustering the curve down around 26-32bps on the week (belly outperformed)...



Source: Bloomberg

The 10Y Yield fell below (and held below) 4.00% and 30Y tumbled down to within a tick of the same level today - the lowest level since 7/31...



Source: Bloomberg

Bitcoin and Ethereum were both down around 4.5% on the week as The Fed prompted a recovery from the Monday "Liz Warren" plunge...



Source: Bloomberg

That reversed all the curve steepening from midweek...



Source: Bloomberg

NatGas rallied on the week and oil (Brent) managed to just close green on the week, the first positive week since October...



While bitcoin was down a little this week, the trend is your friend in crypto and gold as real-yields re-compress...



Source: Bloomberg

Finally, we note that The Fed's reverse repo facility has seen over $150BN drained from it in the last 3 days which, outside of quarter-end liquidity needs - is the largest drawdown since the SVB crisis in March...



Source: Bloomberg

Why does this matter? Because...

More of the same from the last fifteen years - liquidity is all that matters!

But is the resurgence in stocks almost done?



Or will Powell surprise even more with and end to QT or restart of QE? Would that really be as big a jump as "no rates cuts even considered" on Dec 1st to "6 rate-cuts possible" on Dec 13th?

 

Goolsbee Grounds Bond-Bulls But Bitcoin, Black Gold, And Big-Tech Bounce
MONDAY, DEC 18, 2023 - 04:00 PM

Having had the weekend to soak up the good-cop (Powell), bad-cop (Williams et al.) routine of last week, futures pushed higher overnight extending the exuberance and giving the benefit of the doubt during this quiet (post-OpEx) week to Powell (don't fight him, remember). Rate-cut expectations have (hawkishly) pulled back from Wednesday's euphoria but not enough to change the "the peak is in" narrative...



Source: Bloomberg

Chicago Fed's Goolsbee was wheeled out again to uncomfortably walk back the market's enthusiasm... without admitting that was what he was doing.



"It's not what you say or what the (Fed) Chair says, it's what do they hear and what do they want to hear?" Goolsbee said in an interview with CNBC, in reference to the response of financial markets to Powell's comments last week:

"I was confused by what the market was imputing...

...I was surprised that the market reacted" that way...

...the markets are a little bit ahead... they jumped to the end part, which is 'We're going to normalize quickly', and I don't see that."

He also seemed to confirm what Fed's Williams said, that they did not discuss future rate-cuts at the meeting.

"We don't debate specific policies speculatively about the future"

Late in the day SF Fed's Daly was less dovish too, suggesting that "rate-cuts could be needed in 2024." Not exactly a "we're gonna cut 6 times no matter what" that the market 'heard'.

That spooked the bond market, with yields rising...



Source: Bloomberg

...but still well below pre-Powell levels. Yields were up around 3-5bps today (long-end lagging)...



Source: Bloomberg

No major macro to speak of today (weak NYFRB Services and rebound in NAHB sentiment), but global financial conditions continue to loosen dramatically...



Source: Goldman Sachs

And those 'easy' financial conditions helped (long duration) tech stocks shrug off higher rates and lead the Nasdaq and S&P to gains on the day as Small Caps lagged. The Dow ended unch...



Growth stocks are recovering their post-Fed relative underperformance to Value...



Source: Bloomberg

"Most Shorted" stocks opened down, tried the ubiquitous squeeze higher, failed and ended lower...



Source: Bloomberg

But MAG7 stocks rallied strongly for the 4th day in the last 5 to a new high...



Source: Bloomberg

AAPL did not participate in the MAG7 melt-up after China iPhone bans and US iWatch bans... 'Cook'ed?



VIX was marginally higher on the day (still with a 12 handle) but VVIX is flashing an amber warning signal that some are getting anxious about a mini-Minsky...



Source: Bloomberg

But hey, why worry - look what Santa's got in store...



Source: Bloomberg

The dollar was broadly speaking flat against its fiat peers today



Source: Bloomberg

Bitcoin ended marginally lower after roundtripping the ubiquitous Asian-selling-programs, finding support at the pre-Fed lows...



Source: Bloomberg

Gold managed small gains today after Friday's tumble...



Source: Bloomberg

Oil prices surged intraday amid more headlines of attacks, and re-routings of tankers in the MidEast with WTI psuhing up near $75 before fading back...



WTI once again found support at around the $70 level (having traded roughly between $70 and $90 for the last 18 months), and is pushing up against the 21-day moving-average



Source: Bloomberg

...and with positioning so short, there could be more room to run...



Finally, it's deja vu all over again...



Source: Bloomberg

So what happens next? Premature ease-ification could be a problem for you Mr.Powell (or the next Fed Chair).