Market Conditions

Stress Test 2016: Fed Says All 33 Banks Can Surive 70 VIX Without Needing Outside Capital

While hardly coming as a surprise to anyone, moments ago the Fed announced that all 33 banks have enough capital to withstand a severe economic shock, though Morgan Stanley trailed the rest of Wall Street in a key measure of leverage, Bloomberg reports. The biggest bank cleared the most severe scenario handily, with the exception of Morgan Stanley whose projected 4.9% leverage ratio tied for last place alongside a Canadian bank’s U.S. unit, falling within a percentage point of the 4 percent minimum. As a result of today's "test result" many banks will likely win regulators' approval next week to boost dividends.

Hawkish Fed Looms As Initial Jobless Claims Plunge Near 42 Year Lows

Who knows best? The Department of Labor  - who is telling the American public that the labor market, based on initial claims, are hovering near the best levels in 42 years; or The Fed - who is warning that labor market conditions are deteriorating at the fastest pace in seven years?

 

As Of This Moment, Barclays Is Not Accepting FX Stop Loss Orders

"Both Barclays Electronic Trading Desk and Barclays Voice Spot Trading Desk will endeavour to operate as close to normal levels of service as the Disrupted Market Conditions allow.  However, taking into account the potential Disrupted Market Conditions during the EU Referendum Period, Barclays has decided to impose certain restrictions on its electronic and voice FX Stop Loss order offering during this period and would like to highlight certain matters with respect to Disrupted Market Conditions."

Werner Issues "Disturbing" Warning About State Of Trucking And Logistics Industry

Following ongoing warnings of the dismal reality surrounding heavy, Class 8 trucking, reality finally hit overnight when trucking and logistics company Werner Enterprises warned that a sluggish freight market and increases to driver pay would hurt its second-quarter earnings, leading to a plunge in its stock price. Werner said it now expects to report a profit of 21 cents to 25 cents a share, which includes a pretax gain of $3.4 million from the sale of real estate; this was nealy 50% below the consensus forecast of 40 cents a share.

Fed Finds "The End Of The Road"

The big risk for the Fed has always been the market would “call their bluff”  be unwilling to buy into the “forward guidance.”  It is currently too soon to know for certain but reactions following yesterday’s announcement are not promising.

Housing Bubble 1.0 Vs. Housing Bubble 2.0 - The Culprit Is "Shadow Demand"... Again!

"If 2006 was a known bubble with housing prices at “X”, affordability never better, easy availability of credit, unemployment in the 4%’s, total workforce at record highs, and growing wages, then what do you call today with house prices at X+ 5% to 20%, worse affordability and credit, higher unemployment, weakening total workforce, and shrinking wages? Whatever you call it, it’s a greater thing than “X”."

Initial Jobless Claims Still Decoupled From Hypocritical Fed's "Experimental" Labor Market Index Collapse

Having been told yesterday by Janet Yellen that The Fed's Labor Market Indicator is merely "experimental" - contradicting her Aug 2014 exuberance over the index - we thought it worth highlighting just how decoupled the nation's labor market data really is. Initial claims rose to 277 from 264k, slightly higher (worse) than the expected 270k but remain near the best in 40 year, as LMCI crashes to 6 year lows...

Fed Keeps Rates Unchanged, Says Labor Market "Will Strengthen" But Slashes Rates Hike Trajectory

With bonds and bullion remainig bid post payrolls, post May Minutes, post April FOMC, and post December's Fed rate-hike, it is clear that the market is losing faith in The Fed... and we suspect The Fed is losing faith in itself as it takes the ax (once again) to its growth and rate forecasts (the dot-plot).

  • *FED SAYS IT EXPECTS LABOR MARKET INDICATORS `WILL STRENGTHEN'
  • *FED: MEDIAN FED FUNDS EST. 1.6% END-2017 VS 1.9% IN MARCH
  • *FED SAYS PACE OF LABOR MARKET IMPROVEMENT HAS SLOWED

July rate-hike odds are at 18% (and Sept at 19%). Pre-Fed: S&P Futs 2082, 10Y 1.61%, EUR 1.1240, Gold $1285

JPM's Quant Guru Unveils The $1 Trillion Catalyst That Will Unleash The Next Market In Turmoil

"About ~$1,000Bn of S&P 500 options expire this week. The gamma imbalance turned towards puts yesterday ($9bn per 1% currently), and this will likely push realized volatility higher near term. Post expiry, clients are likely to roll put strikes higher, which will also be supportive of higher volatility. Yesterday’s large move on the VIX indicates short gamma exposure of dealers on VIX products as well." - Marko Kolanovic

The Fed Has Whiffed Again - Massive Monetary Stimulus Has Not Helped Labor, Part 2

In today’s world of flexible just-in-time production, hours-based labor scheduling and gig-based employment patterns, there is really no such standardized labor unit as a “job”. In that context, a simple paint-by-the-numbers exercise demonstrates the foolishness of the Fed’s obsession with hitting a quantitative “full employment” target.