The S&P 500 has not had a nine-day win-streak since 2004 and it appears Kamu-nism was enough to stop stocks doing it again today as Harris unveiled her cunning plan, including 28% corporate tax, price-controls, 44.6% capital-gains tax, and last but not least, a tax on unrealized gains.
Small Caps were the ugliest horse in the glue factory today as the algos tried their hardest to maintain the win-streak.
The NYSE Composite Index did make a new record high at this morning’s open, but then faded back…
Source: Bloomberg
The Mag7 basket managed another day of (marginal) gains (but we do note that it stalled intraday at a key resistance level)…
Source: Bloomberg
But ‘most shorted’ stocks were puked out of the gate…
Source: Bloomberg
And this occurred as growth-surprise data slumped back to multi-year lows (not helped by the crash in Philly Fed’s survey today)…
Source: Bloomberg
…which lifted rate-cut expectations modestly…
Source: Bloomberg
Are we back in Goldilocks-land – just enough growth-scare to enable the Fed doves support for stocks but not enough growth-scare to terrify investors’ guesses at future earnings.
The dollar doesn’t care – it’s riding the dovish path lower no matter what…
Source: Bloomberg
And despite the best efforts of Benoit and his BIS buddies to tamp down enthusiasm for alternatives, gold surged to a new record high today…
Source: Bloomberg
But, we do note that Treasury yields did plunge today (6-7bps across the curve) – a little more growth-scare than equity bulls might have liked to see…
Source: Bloomberg
As the chart above shows, the long-end (10Y and 30Y) has erased all of the CPI-spike from last week.
Most notably, the 2Y yield tumbled back below 4.00% (after CPI sent yields back up to pre-payrolls levels)…
Source: Bloomberg
Oil prices limped lower once again (5th day of the last 6) as growth-scares weighed on commods…
Source: Bloomberg
Bitcoin ripped up above $61,000 overnight during the Asia session, then was punched lower during the US session…
Source: Bloomberg
Bear in mind, that pattern of trading should come as no surprise at all…
Finally, while markets have recovered, Deutsche Bank warned this morning in a note to clients that catalysts behind the retreat haven’t necessarily evaporated. The firm outlined five key risks that remain that investors should watch:
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First, equity valuations are still at historic highs, with the market trading in moderately overweight territory, the bank said. This made some on Wall Street uneasy even before August’s sell-off and continues to be a point of anxiety as investments pile in.
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Second, economic data remains vulnerable. Part of the reason equities dropped dramatically in August was a softer-than-expected nonfarm payrolls print, which disappointed estimates of 194,000. This was an unwelcome sign of weakness, but not a recessionary reading, DB said. That leaves room for even more disappointing data, which could bring larger consequences to investors if it were to happen.
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Third, monetary policy is getting increasingly tight on real terms, with DB noting that the real Fed funds rate recently hit its highest since 2007.
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Fourth, September has been a seasonally bad month for stocks over the past few years. The S&P 500 has fallen during the period for four straight years, and in seven of the past 10. DB says it’s also been a bad month for fixed income, with the Bloomberg global bond aggregate falling during the past seven Septembers.
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Fifth, geopolitical tensions are still high. DB notes that Middle East conflicts contributed to an equity sell-off in April, while oil prices also hit their highs for the year around the same time. More recently, in August, oil saw their biggest single-day spike of the year on reports of further escalation, the firm said.
And under the hood, options markets are still pricing in the potential for short-term chaos amid a heavy calendar of risk catalysts including Powell’s address at Jackson Hole, NVDA earnings, NFP, CPI, and OpEx…
Source: Bloomberg
As VIX rose notably on the day and VVIX rejected the Maginot Line at 100…
Source: Bloomberg
Was today’s dip a sign that the momo-chase is over… for now?
Tyler Durden
Tue, 08/20/2024 – 16:00
