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Stocks Soar To Record Highs As Hawkish Fed, Dovish Trump Spark Bond Bloodbath

Just to clarify – Trump said nothing new at all – and added no detail, another major US retailer blew up, ‘hard data’ disappointed (soft surveys gained), Fed speakers were the most hawkish since Volcker, and The Dow soars 350 points to top 21,100… makes perfect sense…

 

Hawkish FedSpeak sent March rate-hike odds soaring over 80%…

 

But the probability of a rate hike is rising as GDP expectations collapse…

 

The Dow broke 21,000 (and 21,100) as it gapped open and never looked back…best day since the election…on the day when GDP expectations were smashed lower…

 

VIX was slammed back below 12 again…

 

Pushing The Dow to the most overbought in decades once again…

 

Since Feb 2nd when The Dow last crossed above 20,000, 4 stocks are responsible for over 500 points of the gains…GS, BA, MMM, and AAPL

 

While the day’s rally was assigned to Trump not blowing it, we note that it appears more Fed (hawks) and PMIs driven…

 

So it appears Fed and EU/China PMI data sparked an initial move and then gamma sent stocks soaring during the US day session – once again confirming, as WSJ reports, if you bought at the open and sold at the close each day since the beginning of 2009, you’d be up 85%. Buying at the close and holding overnight to sell at the open would have netted you just about half of that.

What’s interesting is that most of that divergence came about in the last year. But they began moving apart in early 2016: Since the market hit a recent low on Feb. 11, 2016, stocks have risen 26% during the daytime, and just 3.2% during the night-time.

All on the back of the biggest short-squeeze in a month…

 

The big move was all overnight to gap stocks open…Small Caps and Trannies led the day (squeeze)

 

The 56 day streak of no 1% moves is now over (with today’s 1.5% gain) but it’s been 96 days since the S&P had a 1% down day…as The S&P 500 topped 2400 for the first time.

 

Financials were the day’s biggest winner…Up over 3% – the best day since the election

 

NOTE – today’s surge in bank stocks took them above gold for the first time in 2017…

 

Pushing S&P Financials to the highest since Dec 2007… (and is the most overbought in 3 months)

 

VIX remains entirely decoupled from stocks…

 

Bonds bloodbath’d – worst day for Treasuries since the election…pushing them higher in yield on the year

In Futures only the long-bond is red for the year…

 

As bond yields ripped up to the decoupling point from stocks from two weeks ago…

 

And bonds notably decoupled from the USD after US stocks opened…

 

The Dollar Index surged yesterday late and overnight on hawkish Fedspeak but then sold off all day once the day sesssion started… Looks like a stop hunt to us…

 

The Loonie is weakest on the week…

 

Despite a collapse in Mexican manufacturing…

 

The peso surged (thanks to chatter of a Fed swap line bailout) and then dumped when Carstens denied the rumors…

 

WTI and RBOB kneejerked hgher on DOE data but found no wild algo support this time and tumbled…

 

Gold and Silver rallied non-stop through the day session…

 

Finally we note that US Sovereign Risk spiked in the last two days…

 

And debt ceiling concerns remain extreme in swap spreads…

 

Oh and this…

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