Remember that in addition to its primary function, which is to push stocks higher i.e., the "wealth effect", the Fed's Quantitative Easing has another just as important role: to monetize the US deficit. Which is why the news that was released moments ago from the Treasury, namely that the US deficit for Fiscal 2014 has just fallen to a meager $483 billion, or 2.8% of GDP (mostly thanks to the GSE inbound receipts which in turn were courtesy of the latest dead cat bounce in housing), and down from $680 billion a year ago, is hardly what the BTFDers were hoping for.
An artist's impression of the panic currently gripping global central-planning headquarters.
"In the first 15 minutes of trading the S&P 500 E-Minis traded below the S&P 500 cash index despite a fair basis, according to Bloomberg, of -6.72. This is unheard of and something I have never witnessed in my near fourteen year career on the Street. I can only conclude that many large institutions threw in the towel on the Open in wake of the dislocations in not only stocks but also treasuries." - FBN's Chief Market Strategist
Despite ex-CFTC-chief Bart Chilton's exclamation that "this is the safest market ever," Nanex's Eric Hunsader explains this morning's manic trading activity saw stocks suffer the most mini-flash-crashes since Summer 2012's Knight Capital collapse...
Time For The Plunge Protection Team: S&P Red For The Year, 10Y Under 1%, Europe Crashing. No LiquiditySubmitted by Tyler Durden on 10/15/2014 - 10:10
A quick summary of where we have been this morning: VIX > 27 (3yr highs); S&P 500 -0.4% year-to-date (6mo lows); 2Y TSY yield < 25bps (17mo lows); 10Y TSY yield < 1.90% (17mo lows); European stocks -3% (11mo lows) lows; US HY credit 410bps (15mo wides); WTI Crude $80.01 (28mo lows). So that can mean only one thing... PPT is in the house, courtesy of USDJPY... and ultra-low levels of liquidity.
Speculative short positioning in 10Y Treasury futures, according to CFTC, is at its highest since 2007 as traders added to shorts last week. Net positioning in 10Y Treasuries overall is its most short since June as shorts piled on in the last 2 weeks by the most since the Taper Tantrum.
The Nasdaq is opening down 0.5% year-to-date (having been gloriously above 10% in mid-September) and S&P 500 has now turned red for the year. Only Trannies remain green in 2014 (for now)...
“We’ve got the proverbial 800-pound gorilla -- the consumer,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “Households are more fixated on the good news here, and a big part of that is the labor market. The U.S. is going to be pretty immune to the rest of the world.”
So, it's not just Ferguson... Just because the business media channels have decided that Hong Kong protests are not incendiary enough to trump Ebola and stock market crashes, does not mean the pro-democracy efforts are waning... as this poor gentleman found out.
Treasury yields are collapsing. 30Y yields are now at Taper Tantrum lows and the rest of the complex is catching down rapidly...
It may come as a shocker to some, but hopefully not to anyone here, that September retail sales were arguably the worst of the year excluding the "abortion" that was the Polar Vortex. The simple reason: after the US consumer loaded up on debt in the spring and the summer, the payback hangover has finally hit with the payment due in the mail resulting in a collapse in revolving credit as reported previously, and as the September retail sales just confirmed.
As we explained in detail yesterday, between governments hopes to exit the bailout program early (in order to save their election) - which the market does not like the idea of - and fears over the reality of OMT, Greek markets are tumbling. Greek stocks are down over 9% - the biggest plunge in 6 years and bond yields are surging... it appears the market is demanding Draghi get back to work as the "whatever it takes" gains have been halved (Greek stocks -35% from March 2014 highs).
From 5 years highs to 6-month lows in one month - Empire Fed manufacturing missed expectations by the most since June 2010 as New orders collapsed. The employment sub-index rose but workweek tumbled. Yet again, as we have described in greast detail, US economic data surges into the end of Q3 (government fiscal year-end) on spend-spend-spend year-end budget flushes, then collapses and disappoints.