• Pivotfarm
    05/21/2015 - 16:48
    Janet Yellen at the Federal Reserve believes that the partying on Wall Street and in the financial institutions may “lead to trouble”.
  • EconMatters
    05/21/2015 - 13:17
    The 2nd tallest building in the world, Shanghai Tower, will open to the public mid 2015 during a time when China's own economy is going through the darkest period in recent years.     

Equity Markets

Tyler Durden's picture

VIX Tops 15 As Stocks Slide To 2-Week Low





Just 2 days ago everything was awesome (according to stocks). Nasdaq hit 5000 proving it's different this time, despite the total collapse in macro and earnings data. So perhaps - just perhaps - as buybacks slow, US equity markets are exposed to reality underneath them. VIX has snapped back above 15, its highest in 10 days, and the S&P is back at 2-week lows... retracing all the "Greek Deal" gains.

 
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Market Wrap: Futures Slide Despite Latest Central Bank Easing Blitz





Just like yesterday, it has - so far - been mostly about Asia in the overnight session, where as reported previously, we got the latest central bank engaging in an "unexpected" rate cut, after Reserve Bank of India Governor Rajan cut rates in an unscheduled move days after the government agreed for the first time to give the central bank a legal mandate to target inflation. This was India's second rate cut in 2 months, and yet despite the Sensex surging to a all time high over 30,000, it subsequently ended up closing red on the day, down -0.7%, despite the Indian currency sliding 0.4% to 62.1463 to a dollar. Is the half-life of thany incremental rate cut in an unprecedented barage of global central bank easing now less than a day?

 
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"What’s Going On" - Traders Stumped As HFTs Frontrun Last Night's Australia "Surprise" Rate Decision





Yesterday at 10:30pm eastern, or alternatively today at 2:30pm local time, Australia's central bank unexpectedly did not cut its key interest rate, keeping it at 2.25% even as the majority of economists had predicted a rate cut. However, not everyone was surprised. Just a minute before the official announcement at bottom of the hour sharp, the AUD surged by 0.6%, rising from 0.7774 to 0.7822, suggesting that at least one algo and likely more, had advance knowledge of the unchanged decision, as shown in the  chart below.

 
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"Monetary Policy Is Bankrupt" Dr. Lacy Hunt Warns "Bonds, Not Stocks, Are A Good Economic Indicator"





"While the wealth effect is a theoretical possibility, it is not supported by economic fact. The stock market is not a good guide to the economy, but...the bond market is a very good economic indicator. When bond yields are very low and declining it’s an indication that the same is happening to inflation and that economic activity is weak. The bond yields are not here for any fluke of reason. They are here because business conditions in the US and abroad are quite poor."

 
Tyler Durden's picture

Market Wrap: Futures Fractionally Red Ahead Of Pre-Weekend "Nasdaq 5000" Push





If there isone thing that is virtually certain about today's trading (aside from the post Rig Count surge in oil because if there is one thing algos are, it is predictable) is that despite S&P futures being a touch red right now, everything will be forgotten in a few minutes and yet another uSDJPY momentum ignition ramp will proceed, which will push the S&P forward multiple to 18.0x on two things i) it's Friday, and an implicit rule of thumb of central planning is the market can't close in confidenece-sapping red territory ahead of spending heavy weekends and ii) the Nasdaq will finally recapture 5000 following a final push from Apple's bondholders whose recent use of stock buyback proceeds will be converted into recorder highs for the stock, and thus the Nasdaq's crossing into 5,000 territory because in the New Normal, the more expensive something is, the more people, or rather algos, want to buy it.

 
Tyler Durden's picture

"Faith In Fed Abilities" Are Too Firmly Embedded In The Investor Class





Financial markets are upside down.  Financial repression and belief in the “Fed put” pushed investors further and further out the risk curve over the past six years.  Too many asset managers have remained fearful of underperforming peers and benchmarks; a powerful incentive to stay ‘risked-up’.   The psychology of bullish, and faith in Fed abilities, have been too firmly embedded in the investor class. Given that markets don’t seem to want to believe that a June hike looks probable, we expect an outsized market reaction to a hike, lower long yields to accompany it, a flatter curve, wider credit spreads, higher market volatility, and materially lower equity markets.

 
Tyler Durden's picture

Stocks Resume Rise To New Records As US Prepares For First Annual Deflation Since 2009





Following a quiet overnight session in which the main event appears to be a statement by Chinese premier Li for more active fiscal policy, which has pushed the metals complex higher, although technically every other asset class as well, with US equity futures set to open in fresh record high territory, even as 10Y yields around the world continue to decline, attention today will fall on the CPI print due out shortly, because if consensus is correct, January will be the first month this decade when US inflation posts a negative print, mostly due to the delayed effect of sliding commodity prices. As Deutsche recaps, the most important number today is the headline CPI where the headline YoY rate is predicted to be negative by the market (-0.1%) for the first time since 2009. Over this period the YoY rate stayed negative for 8 months. However before this we hadn't seen a full year decline since August 1955. In other words, a few months before what may be the first US rate hike for a new generation of traders, the US is set to print its first annual deflation since Lehman, transitory or not.

 
Tyler Durden's picture

Stocks In Holding Pattern Following Blow-Off Top, Oblivious Of Fed's Warning Of "Stretched" Valuations





Following the first of two Janet Yellen testimonies to Congress, the market read between the lines of what the Fed Chairman said when she hinted that "the Fed needs confidence on recovery and inflation before beginning to raise rates" and realized that the case of a June rate hike is suddenly far less realistic than previously expected, as a result not only did we see another blowoff top in stocks to fresh all time highs, a move which sent the USD lower, has pushed the median EV/EBITDA multiple to the mid 11x (!) range and the forward PE to just shy of 18x ironically coming on a day when the Fed itself warned about "stretched" equity valuations, and led to brisk buying of global Treasurys across the board, pushing the 10 Year in the US back under 2%, and due to the global convergence trade (because if the Fed returns to QE, it will be forced to buy up Treasuries not just in the US but around the globe, since net issuance including CBs globally is now negative) and leading to today's German 5 Year bond auction pricing at a negative yield for the first time ever.

 
Tyler Durden's picture

If The Fed Continues This, "There Won't Be Any Active Managers Left In 5 Years"





As the dash-for-trash continues in US equities, Neuberger Berman sums up the state of investing currently, "there has certainly been little reward for owning high-return, superior business models that are conservatively financed," as Bloomberg notes, Fed policy has had the “unintended consequence” of boosting the stocks of companies with heavy debt and little or no earnings. Typically after a recession, such companies lose out to firms that generate more cash and have better balance sheets; this time, no “Darwinian” shakeout happened and low-quality stocks ruled. Managers say they haven’t changed, the market has.

 
Tyler Durden's picture

Caught On Tape: The Moment Fundamentals Catch Up To US Equity Markets





As the chasm between earnings (tumbling most since 2008) & macro data (90% misses in February and weakest  in 11 months) and the inexorable rise of the US equity market yawns ever wider, we thought the following clip (from South Korea) perfectly summed up what happens next...

 
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"This Shorting Opportunity Is As Great As 2007-2009", Billionaire Crispin Odey Warns





"For me the shorting opportunity looks as great as it was in 07/09, if only because people are still looking at what is hap-pening and believe that each event is an individual, isolated event. Whether it’s the oil price fall or the Swiss franc move, they’re seen as exceptions. ... we used all our monetary firepower to avoid the first downturn in 2007-09, so we are really at a dangerous point to try to counter the effects of a slowing China, falling commodities and EM incomes, and the ultimate First World effects.  This down cycle is likely to be remembered in a hundred years . Sadly this down cycle will cause a great deal of damage, precisely because it will happen despite the efforts of the central banks to thwart it."

 
Tyler Durden's picture

With Greece Swept Under The Rug, Focus Turns To Janet Yellen's Congressional Testimony





There was an expectation that today's receipt by the Troika of the revised Greek "reform proposal" would send risk and the EUR higher, which is probably precisely why nothing has happened so far, and US equity futures are unchanged ahead of what the HFT algos' new attention focus is today, namely Yellen's semi-annual testimony to Congress. As a result, the only thing that has seen notable strength this morning is the USD, which has surged to 119.50 against the Yen, and briefly pushed the EURUSD under 1.1300. which also means that WTI has also gone nowhere overnight and remains under $50. One wonders just what OPEC "rumor" those long crude will leak today.

 
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Why The Last Thing US Equity Markets Want Is Good Data





When, amid the plunging stock market in October as we neared the end of QE3, Jim Bullard said QE4 was possible; not only did markets then undertake the longest and most consistent streak of gains in history, he appears to have entirely changed the market's reaction function to data...

 
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