The Russell 2000 just broke crucial primary support from the 2009 lows to become the first of the major indices to do so...
The game is many boards deep. Nobody has god-like powers, every player makes mistakes and miscalculations. The advantages and arrangements are all contingent and temporary; those with the most flexibility and the deepest spectrum of assets will eventually increase their influence at the expense of those with weaker hands and those who fail to respond promptly and decisively to new configurations on the multiple boards in play.
We have the very makings of a Crash. If stocks breakdown from this line and cannot reclaim it, we could easily wipe out all of the gains going back to 2013.
Now that Ebola is officially in the US on an uncontrolled basis, the two questions on everyone's lips are i) who will get sick next and ii) how bad could it get? We don't know the answer to question #1 just yet, but when it comes to the second one, a press release three weeks ago from Lakeland Industries, a manufacturer and seller of a "comprehensive line of safety garments and accessories for the industrial protective clothing market" may provide some insight into just how bad the US State Department thinks it may get. Because when the US government buys 160,000 hazmat suits specifically designed against Ebola, just ahead of the worst Ebola epidemic in history making US landfall, one wonders: what do they know the we don't?
Junk bond investors suffered their biggest quarterly loss since 2011, losing 1.7% in Q3 pushing yields up to one-year highs (despite Treasury yield compression). Managers, knowing full well the underlying liquidity to handle any further selling is not there are out en masse explaining that "high-yield should bounce back in the fourth quarter," relying on the fact that 'historical' defaults are still low and the economy is recovering (as if that's not priced in already). The worst hit segment of the junk market is CCCs and below - at 22-month lows - as Bernanke and Yellen forced investors ever further along the risk spectrum for yield. Of course, equity markets (Russell 2000 aside) have ignored much of this decline until recently, but the plunge in leveraged loan issuance suggests all that cheap-buy-back-funding is rapidly disappearing (even for the best credits and biggest names).
Bill Gross receives a mile high welcome from Janus CEO Dick Weil and President Bruce Koepfgen
Bloomberg reports that stock orders amounting to a whopping $617 billion (yes Bilion with a B) or more than the size of Sweden’s economy, were canceled in Japan earlier today, for reasons unknown although the early culprit is that this was one of the biggest trading errors of all time. Of course, since this trade was noted, and DKed, one can assume that a major whale was on the losing end of the trade: recall that this is precisely what happened to Goldman time and again, when some errant algo caused the firm to lose millions on several occasions in 2012 and 2013. There is one tiny difference: this time it was not Goldman, and the total amount was not a few paltry million but over half a trillion dollars!
ISM Biggest Miss Since January: Orders Tumble, Employment Slides, Backlogs Contract, Construction Spending NegativeSubmitted by Tyler Durden on 10/01/2014 10:13 -0400
So much for the string of near record ISM prints. Oh... and the recovery too.
Yesterday's late-day weakness in stocks is continuing as US equities open this morning led by a collapse in Dow Transports and further weakness in Russell 2000. Treasury yields are also plunging with 10Y at 2.435% (back below the oh-so-important Tepper "end of the bond bull" levels). High-yield credit markets are extremely volatile this morning. USD weakness is helping commodities rally with gold and silver outperforming. VIX just hit 17.5
Dallas County Health Officials earlier noted at least one person who had been in contact with the first US ebola patient was also being tested for the deasdly virus. They subsequently backed off that statement (oddly). Governor Rick Perry will be holding a press conference later today to calm the public we are sure, but in the meantime, the CDC has issued a helpful Q&A to ensure Americans continued to fly, spend, and consume at their leisure and don't worry about the plague... “So this is real. There should be a concern, but it’s contained to the specific family members and close friends at this moment.”
It is not a good morning for Bill Ackman's Pershing Square or Bruce Berkowitz's Fairholme Capital, or the US government for that matter, of course, which happen to be the three largest investors in Fannie Mae. The reason: FNM stock, which at last check, was crashing by nearly 60%.
While yesterday's CDC press conference was factual, it was clearly very much designed to avoid panic as time and again the US public was reassured that Ebola in America was 'contained', 'hard to contract', and would 'stop here'. However, as Bloomberg reports, the man with Ebola in Dallas was initially sent home from the hospital with antibiotics after seeking treatment for an unknown illness, officials said. We know CDC has stated the need for the US to be prepared but the fact that after the patient sought medical care on Sept. 26 and was sent home with antibiotics, he returned in an ambulance to Texas Health Presbyterian two days later and was admitted, suggests US healthcare workers are not prepared for the possibilities that Ebola is here in America - Another suspected Ebola case is being evaluated at a National Institutes of Health facility, U.S. officials said, the 13th such possible infection in the U.S.
Despite Mark Zandi's promises that all is well in the US economy, ADP had dropped (and missed) two months in a row prior to today's print but a very small rise and beat this month (213k vs 205k expected and 205k previous) shows some stability. Of note is that this print is no better than the average ADP job change over the last four years. On the bright side small businesses add the most jobs while medium-sized businesses added the least. Of potential note to this somewhat 'meh' jobs data, yesterday's Consumer Confidence data showed a disappointing plunge in Jobs-Plentiful vs Jobs-Not-Plentiful which suggests Friday's all-important payrolls print may not be as exuberant as expected.