Archive - Jan 6, 2015

For those few who missed the theater from the Capitol you are in luck with the live webcast below.

Few will ever forget the ferocity of the October short-squeeze in US Treasuries that flash-crashed yields. As Nanex notes however, today's yield plunge (price surge) is starting to shape up as an extreme flight-to-safety squeeze. As we noted earlier, US Treasury short positioning into this week was its highest in over 4 years...

We are going to need another Central Bank speaker stat!! The S&P 500 (cash) index just broke below 2,000, 30Y Yields are testing 2.50% yields (just 5bps from all-time record lows) and 10Y well below 2.00%, gold is surging, and oil is plunging... The question for The White House is - should we still blame Europe?

As energy stocks continue to catch down to oil-price's incessant weakness, US energy company credit risk has surged back above 1000bps for the first time in 3 weeks. WTI Crude oil prices just traded to a $47 handle - the lowest since April 2009.

Manhattan: 260 Columbus Ave NYPD calling a level 1 Mobilization in regards to a bank robbery at Chase Bank.

— NYC Scanner (@NYScanner) January 6, 2015

But, but, but... low oil prices are awesome and Yellen was kinda sorta dovish... right? After ripping 5 to 6% off the Yellen FOMC lows in thin illiquid holiday trading, US equities have roundtripped (just as Treasury yields already had) - erasing all that 'hard-earned wealth'.

In its usual 'leak the plans and judge market reactions' methodology, unnamed sources have released to Dutch newspaper Het Financieele Dagblad, three potential options that the ECB is considering for buying government bonds. As the Jan 22nd ECB meeting looms, Reuters reports that while the ECB declined to comment, this 'strawman' appears very similar to comments made by ECB chief economists Peter Praet last week. For now, the reaction is not positive... as this indicates the ECB is nowhere near a decision.

The Greek 3Y-10Y yield curve is back over 400bps inverted this morning as bond (and stock) prices re-tumble following a new reports. As The FT reports, forecasting group Oxford Economics says it has carried out an "in-depth" analysis of opinion polls ahead of Greece's snap general election on January 25, which shows that the radical Syriza party is on course to win a "clear mandate" to push through anti-austerity policies. Will German worry now?

But the oil-price crash was supposed to goose consumer spending.

UPDATE: "Bad News" bounce breaks bad...

Unlike yesterday - where bad news was bad news - today terrible macro data news is awesome news... Thanks to a liftathon in USDJPY breaking back over 119.00, the S&P has ripped 10 points since ISM, PMI, Factory Orders data disappointed.

Following a disastrous Manufacturing ISM report last week, today it was the turn for its Service cousin to report. And while it wasn't quite the abysmal faceplant that some had expected the seasonally adjusted number to be, printing at 56.2, down from 59.3 and far below the 58.0 expected (but just above the lowest estimate of 56.0), it still was the biggest miss to expectations since September 2013, and the lowest print since June.  And while the details were just as atrocious, with every single ISM component declining in December - something that has not happened since the Great Financial Crisis - a report which literallyh said "Obamacare and wages are still the biggest enemies to profitability", all eyes are focused not so much on the tumble in Business Activity and New Orders, but on Prices, which at 49.5, posted their first contraction since September 2009.

For the 4th month in a row, US Factory Orders have fallen MoM. November's 0.7% drop is worse than the 0.5% decline expected and leads to the biggest yearly drop since March 2013. Capital Goods New Orders tumbled 0.8% as did non-defense capital goods shipments (down 0.9%). Having risen for 3 months, November saw a 8.2% plunge in defense new orders but it was the across-the-board slide in consumer goods orders and shipments, IT new orders, and Computers & Electronics (despite the massive tax cut from low oil prices!!??) that weighed heavily.

Markit's US Services PMI missed expectations of 53.7, priting at 53.3, its lowest since Feb 2014 (mid Polar Vortex). From record highs in June, PMI has plunged non-stop for six months leaving Markit noting Q4 growth is looking more like 2.0% than the 5.0% exuberance in Q3.

Citing "softening market conditions influenced by oil," US Steel has issued lay-off warnings to 756 workers in the US... Layoffs will begin in early March as both Ohio and Texas plants will be idled.

It appears "the trend is your friend" is only a mantra that 'speculators' are willing to follow for stocks as the incessant rally in US Treasury bonds has led traders to position for higher rates at the largest level since May 2010 (more short squeeze, rates to 1%-handle ammunition?). However, the surging stock market has merely encouraged more to follow that trend as S&P 500 specs are the 'longest' since July 2013. Just as we noted previously, this is deja vu all over again for hedgie positioning into 2014 (but even more extreme)... and that was a painful year for most.