US Treasury yields are plunging again this morning. From 4Y maturities out, yields are around 10bps lower with 30Y under 2.30%, 10Y under 1.65%, 7% under 1.5%, and 3Y under 75bps!! Since QE3 ended, 30Y bond yields are 84bps lower, 2Y 3bps lower.
It was less than 24 hours after we posted that either oil will double from here allowing energy companies to grow into a normal P/E multiple, or energy stocks will have to crash by over 40% for the ridiculous 23x to return to its normal, long-term average of 13.6x. Moments ago energy giant Chevron admitted that not only does it not see oil doubling any time soon, but that energy prices are almost certain to go far lower from here, and as a result the company decided that after buying back $5 billion of its shares in 2014, i.e., buying high and higher before the stock crashes may not be the best use of dwindling cash flow, and as a result has just suspended its stock buyback program of the rest of 2015. Yes, energy giant Chevron just ended its buyback!
"After putting considerable thought into making another run for president, I’ve decided it is best to give other leaders in the Party the opportunity to become our next nominee." - Mitt Romney
Presenting: the burger bubble.
Following finance minister Varoufakis' insistence that Greece will not accept more debt (or what EU calls a "bailout") and talks with the Eurogroup chief end, Greek bond yields have surged (and prices dropped) with 3Y GGBs back over 19% - the highest since the crisis. Greek bank stocks - after yesterday's exuberant penny stock squeeze - are falling once again.
Having tumbled (and missed) for two straight months, hope triumped in January and pushed Chicago PMI above expectations printing 59.4 (against 57.4 consensus). This is still the 2nd worst print since July so let's not get all excited quite yet as only 4 components rose. This is the 4th month in a row of negative YoY prints. So just to clarify - US GDP misses notably and stocks say "meh" but Chicago PMI beats and stocks smash higher on a JPY lifeboat...
Back over 15 / USD for the first time since March 2009, the Mexican Peso is tumbling hard this morning... and the Brazilian Real is also tanking (back near 10-year lows) - no clear catalyst aside from further weakness in oil producer and EM FX sentiment.
Having explained last month why he would not bail out the stock market again, (non-voting) Fed member Jim Bullard trotted out the usual vicissitudes this morning on Bloomberg TV trying to sound as upbeat and positive as possible: ECB QE is good for the US economy, low oil prices "unambiguously positive" for US, and ses unemployment below 5% in Q3. But then he unleashed the awful truth:
*BULLARD SAYS HE'D LIKE TO GET OFF ZERO RATE SOONER, REASONABLE TO EXPECT RATE RISE JUNE OR JULY
Warning that "waiting to raise rates, risks falling behind the curve," which sent Treasury yields lower and stocks into a confused frenzy of "what did he say?" as they realize that the upbeat talk is just talk and The Fed will raise rates no matter - as we noted yesterday - it's the lesser of two evils.
UPDATE: "CONSTRUCTIVE TALKS" are over: VAROUFAKIS SAYS WILL NOT ACCEPT SELF-PERPETUATING CRISIS
As Eurogroup chief Jeroen Dijsselbloem (of "template" foot in mouth infamy) heads to Athens for talks today, Bloomberg reports the new Greek Finance Minister Yanis Varoufakis has a clear message for his European overlords of the past: “We don’t want the 7 billion euros...We want to sit down and rethink the whole program." While this exposes the nation's banking system to further runs, yesterday's revelation that Russia could step in with financing should they need it, leaves Dijsselbloem and Shulz with less and less leverage even as Spain's chief economic advisor warns, if Greece doesn't play along, "there will be problems on all fronts."
Q4 Annualized GDP Misses, Tumbles To 2.6% From 5.0%; Surging Personal Consumption Pulled Forward From 2015Submitted by Tyler Durden on 01/30/2015 - 08:44
Following last quarter's upward revised 5.0% GDP, driven higher mostly as a result of even more mandatory Obamacare taxation, Q4 GDP had nowhere else to go but down, the only question was how much. Wall Street estimated 3.0%. Moments ago we got the first estimate for Q4 GDP and it was a miss, printing at 2.6%, and nearly 50% below the Q3 annualized number. This also means that the final 2014 GDP is 2.4%, higher than the 2.2% in 2013 as well as the 2.3% in 2012.
The Employment Cost Index (ECI) has become the new black on economic fashion circles and this morning's data will likely disappoint some. While meeting expectations with a 0.6% QoQ rise, this is slower than the 0.7% QoQ growth in Q3 and what is more problematic is much of the rise was driven by 2.5% YoY rise in Natural Resources industries (which we suspect will absolutely not be there going forward given the layoffs and collapse of the Shale industry). Furthermore, the total cost of employment index was pushed higher YoY by the biggest YoY surge in "benefits" costs since March 2012.
"...but it can't go any lower, right?" On the heels of yesterday's German deflation and today's near-record EU wide deflation prints... and the ongoing tumble in inflation expectations post-Q€ - the rush for the safety of Bunds continues (and with it the arb-drag on US yields) as for the first time ever, 30Y German Bunds yield below 1%...
The sales of iPhone, which are captured in other consumer durable sales, grew on average 60%y/y since September, propelled predominately by the launch of new product. Excluding iPhones, retail sales value would have contracted almost 1%y/y in October, at the peak of the 'Occupy' movement, and expanded a more subdued 1.3%y/y during Sep-Nov 14 (see figure 1). In other words, over 60% of retail sales growth was attributable to iPhone in late 2014.