Archive - Oct 15, 2014 - Story

Despite manufactured earnings reports that apparently 'beat' US financial stocks are the worst performer today and down 9% from its highs in mid-September. Today's drop in XLF - the Financials ETF - is the biggest since Nov 2012, and is red for 2014 now. Of course, this should not be a total surprise since US financial credit spreads have been flashing a much less exuberant tone for a few weeks...

Greece (-6.5% today), Italy (-4.4%), Spain (-3.6%), and Portugal (-3.2%) all saw major stock price collapses today dragging the broad European Stoxx 600 index down 11.4% from its highs just 18 days ago... All European stock indices are now red for 2014

BOTTOM LINE: Business inventories rose less than expected in August. In light of the disappointing September retail sales report and slower-than-expected inventory growth in August, we reduced our Q3 GDP tracking estimate by three-tenths to +3.2%. We also moved our Q4 GDP forecast down a quarter point to +3.0%.

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...

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...