Dow Dead-Cat Bounces Off 200DMA; Nasdaq Ends Below 50DMA

As headline after headline was regurgitated and used a momentum igniting ammo in stocks, the S&P managed to get back to post-Yellen-news highs before dumping into the close on the back the Fidelity "Sell" news. S&P futures closed perfectly at VWAP (and green) but the Russell and Nasdaq closed red. The Dow bounced off its 200DMA and set the lows for the day. USD strength across the board was not rotating into stocks or bonds or PMs as we suspect cash is the friend of the repo-angst deleveraging ahead. Copper and Oil are -2.3% on the week, Gold -0.4% and Silver remains positive +0.5% on the week. Treasury yields limped higher to +2bps or so on the week. VIX fell back on the day from spike high levels of 2013.

Meet The 28 Other Money Market Funds That Broke The Buck After (And Before) Lehman

Everyone knows that one of the immediate catalysts of the near systemic collapse in the aftermath of the Lehman bankruptcy, one which set in motion the sequence of events that led to Bernanke increasing the Fed's balance sheet fourfold, was when the Reserve Primary Money Market Fund announced on September 16 that the value of its shares had dropped to 97, sparking an epic run on money market funds, and requiring an immediate bailout first from its sponsor, and then the Federal Reserve and US government. What is far less known is that the Reserve Primary Fund was just one of many money market funds that got locked out and was in danger of collapse following the decision to let Dick Fuld hang. How many? According to a research note released by the NY Fed itself, at least 28 more!

Fidelity Sells All Debt-Ceiling Maturing Treasuries Despite Blogosphere's "All Clear" Call

Many market-watching prognosticators have dismissed the spike in T-Bill rates on the basis of "well it's only a few pennies, why worry..." missing entirely the 50-100x leverage in TRS and the almost inifinite rehypothecation risk implicit in a missed payment (even if temporary). It seems, despite these views, Fidelity Investments  - the largest manager of money-market mutual funds - said, according to AP, that it no longer holds any US government debt maturing around the time of the nation could hit ist borrowing limit. Action - it would seem - speaks louder than words.

President Obama Unveils The Bernanke Mark II - Live Webcast

As the old Mark I Bernanke rusts and loses power, President Obama has been working on the new improved Mark II version of the Fed Chair. It's older, more female, less facial hair (from what we can see), but critically more dovish in all the places the US investing public demands... Behold, Yellenomics...

Hilsenrath Sets New World Record For Annotating FOMC Minutes

In 4 minutes (and really under 1 minute when the summary headlines hit), WSJ's Jon Hilsenrath managed to parse the 25-page and considerably more diverse of opinion FOMC Minutes into a bite-sized 535 words summarizing the key sections. His conclusion, as we noted previously, despite the various members' angst, they still want to start winding down QE this year and end it next year. It would appear that his 'translation' of the minutes for the investing public offers little hope for moar QE anytime soon - even if fiscal drags are sustained. We are confident neither Hilsenrath, nor anyone else in the legacy media, ever breache[s|d] s the FOMC embargo when they receive the minutes ahead of general release for broader preparation: after all, in a time when everyone is suddenly concerned with the Fed leaking data in advance, that would just be uncivilized.

Stocks Resume Ramp As Old News That Republicans Are Heading To White House, Is Again Regurgitated Late

In a second iteration of news not being read hours ago and suddenly surprising the algos in charge of stock market momentum, minutes ago headlines blasted reports that Boehner would go to a White House meeting. This is precisely what Politico, again, said would happen at 7 am this morning but since apparently nobody bothered to read it, and since it is suddenly news again, everyone is grasping on this "revelation" as if it is a new development. It isn't.

Fed Admits It Is Caught In A Reflexive Catch 22

"... the announcement of a reduction in asset purchases at this meeting might trigger an additional, unwarranted tightening of financial conditions, perhaps because markets would read such an announcement as signaling the Committee’s willingness, notwithstanding mixed recent data, to take an initial step toward exit from its highly accommodative policy...the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market...  it was noted that if the Committee did not pare back its purchases in these circumstances, it might be difficult to explain a cut in coming months, absent clearly stronger data on the economy and a swift resolution of federal fiscal uncertainties.... postponing the reduction in the pace of asset purchases would also allow time for the Committee to further discuss and to implement a clarification or strengthening of its forward guidance for the federal funds rate, which could temper the risk that a future downward adjustment in asset purchases would cause an undesirable tightening of financial conditions."

FOMC Minutes Reveal "Most Fed Officials Saw QE Tapering In 2013"

In what had already been exposed as a 'contentious' meeting the minutes of the last Un-Taper FOMC meeting show a Fed in turmoil...


Of course, the question is - will Yellen be a consensus-seeker or dictator?

Pre - S&P 500 Futs 1653, 10Y 2.66%, 10/17 bill 40bps, EUR 1.3515, Gold $1310

Stocks Surge As Algos Finally Catch Up With Six Hour Old News

Curious why algos suddenly are buying because other algos are buying because other algos are buying, pushing the S&P higher by 10 point in virtually no time? Simple. It appears at least one vacuum tube decided to scan the news archive, and fell upon the Politico story from 7 AM Eastern which said that the Republicans and Democrats had met in a secret meeting.

Iceland PM Warns Nation's FX Shortfall "Is Matter Of Huge Concern"

Just a few weeks ago, the Icelandic government started threatening to use the European 'template' of removing guarantees on large deposits (though maintaining its capital controls) indirectly pressuring the wealthy to spend (for fear of haircuts). However, the capital controls have backfired as Bloomberg notes, Iceland’s private sector is running out of cash to repay its foreign currency debt, according to the nation’s central bank. The Prime Minister has said that the FX shortfall - exacerbated by his own policy restricting the selling of Krona - is "a matter of huge concern." The government’s biggest challenge is to allow capital to flow freely without triggering a krona sell-off that would cause Iceland’s foreign debt to spike and undermine the nation’s economic recovery.

Despite Ongoing Bill Fireworks, Treasury Sells $21 Billion In Debt In Quiet 10 Year Reopening

The Bill bust up may be causing ripples and major headaches for short-term funding liquidity, and as of today for repos and money markets, but for now at least, the tranquility on any point in the curve longer than a month is untouched. Case in point, the just completed 10 Year auction in which the Treasury sold $21 billion in a reopening of the VS6 CUSIP, at a yield that was well through the When Issued 2.666%, pricing at 2.657%, even if this price was hit following a gradual sell off in the 10 Year throughout the day. The Bid To Cover of 2.58 was somewhat concerning as it was well below last month's 2.86 and below the 12 month average of 2.78, bet better than the auctions from August, July and June. The internals were also less than remarkable, with Dealers taking down 40.2%, Indirects ending up with 38.6%, and Directs left with 21.2%, all in line with the TTM average so hardly remarkable. Altogether a quiet auction and one that confirm so far at least, the debt ceiling concerns are solely limited to the 1 Month Bill end of the treasury curve.

A Giddy Wall Street (And Maxine Waters) Praises The New Fed Chairwoman

Today 3:00 pm nomination by Obama of Janet Yellen as the next Fed chair was hardly news (certainly wasn't news to stocks which briefly dipped below their 200 DMA) in the aftermath of Larry Summers' self-elimination, but nonetheless the sellside brigade was quick to praise her now official nomination for one simple reason: it means more of the same Bernanke policies that have done nothing to benefit broad America, but more importantly have resulted in year after year of near-record Wall Street bonuses, and unprecedented asset bubbles. Why shouldn't the banks then be giddy with excitement that the status quo will not only continue, but the monthly $85 billion in liquidity may in fact increase in time? Below is a selection, courtesy of Bloomberg, of the most vocal praises sung on behalf of the former San Fran Fed president byt the numerous banks that currently exist only thanks to the Fed's actions in 2008.

Home Equity ATM Flashing "Out Of Order" Despite So-Called Recovery

The 19% increase in the Case-Shiller home price index since March 2012 is widely thought to have boosted the prospects for overall household spending via the “wealth effect” transmitted by rising prices and cash out refinancing. But as Bloomberg's Joseph Brusuelas notes, claims that spending is about to snap back should be interpreted with caution.In fact, there is little evidence that the bottoming out of cash out refinancing is translating into rising demand for the moribund service or non-durable retail sectors. Perhaps a lesson for Ms. Yellen here?

Did Paul Ryan Provide A Debt Ceiling Compromise Fig Leaf?

Late last night, Paul Ryan wrote a WSJ op-ed titled "Here's How We Can End This Stalemate" in which some believe he provided the framework for what a possible fig leaf offering on the government shutdown and debt ceiling compromise could look like. While on the surface this may be grounds for optimism, the reality is that Ryan, whose entire proposal is based on the assumption that Obama is willing to negotiate which for now he has shown repeatedly he won't, merely fell back to his traditional "grand bargain" talking point made so clear during the Mitt Romney presidential campaign. What Ryan does suggest is yet another angle to a common bargaining position, one which would be certainly more palatable to Obama: because in order to get both parties happy and reach a compromise, all that would happen is for various long-term assumptions would be changed, with zero actual, real current impact - something politicians are good at, because it does not generate an adverse impact during their tenure (afterwards, it becomes someone else's problem).

Dow Crosses Below 200DMA For First Time In 2013

'They' said it could never happen... 'They' said to BTFATH... The Dow has now dropped 6.2% from its highs 14 days ago  - the biggest such drop in 11 months and for the first time in 2013 has crossed below its 200-day moving average. The trend is no longer your friend it would seem...

Interactive Brokers Sincerely Apologizes, But Hikes Margins On MOMO Stocks Once More

With a surprisingly apologetic note, IB just hiked margins on yet more of the "cult" momentum stocks that have signified the dot-com 2.0 bubble. Almost as if they know they know that their actions are the final straw on the camel's back:

We sincerely apologize for exercising our discretion to modify requirements with short notice, but believe this action to be warranted given the current market conditions.

Today's 30% hike follows Monday's 100% rise in margins and affects stocks such as TSLA (-16.5% from highs), QIHU, and SFUN.

Guest Post: Citizens Are The Soylent Green Of Today's Politics

Neither American political party is worth supporting. Each has interests inconsistent with those of the American public. The claimed political differences are mostly cosmetic, designed for marketing advantage. Both parties act in their self interest which does not coincide with that of the citizens or the well-being of the country. Each party behaves like a self-serving criminal gang. The quaint concept of serving the public exists no longer. The political Ponzi scheme of tax, borrow and spend has reached its limit.

Stocks sMoMoked

It would appear the momo algorithms have been set to full reverse warp speed. A combination of broker margin hikes and a high-beta to a falling market is claiming a few more "cult" stocks victims this mornings - and the volumes are huge...

General Collateral Friendo'd As Bill Battering Finally Slams Repo

As we first pointed out, yesterday's stunning, near-failure in the 4-Week Bill auction, was the straw that broke the illusion of the market stability's back and as even Goldman pointed out, led to the first true "fear-driven" drop in stocks. Today, things are getting from bad to worse, as it is not the Halloween Bill, but the October 17 issue that is getting Friendo'ed as can be seen on the chart below - the 10/17s just hit 42 bps, a nearly 20 bps move in minutes! But while disturbing, what is going on in cash is just the beginning of the story. It is what is going in the shadow markets that could really light the fireworks on fire.

US Treasuries Are "Riskier" Than Italian And Spanish Bonds

In the equity asset management world, the word risk is ubiquitously interchangeable with the word "volatility" for myriad asset allocation models that promise mathematical precision way beyond the realms of possibility in a dynamic world. However, extending that definition of risk, we thought it worth pointing out that, for the last month, US Treasury bonds have become more volatile (more risky) than Italian and Spanish bonds. Something to ponder for The Fed's new head we suspect...