Smith & Wesson’s earnings report gave renewed momentum to a rally in gun-making stocks, which began amid a debate about firearms that followed the Sandy Hook Elementary School shooting 15 months ago. As Bloomberg notes, many gun enthusiasts have stocked up on weapons to avoid potential restrictions in response to the Sandy Hook incident, the second-deadliest mass killing at a school in U.S. history, and that has driven stocks like Sturm Ruger to handily outperform even the highest of high-beta momo indices like the Russell 2000. SWHC was up 16% after earnings - its biggest gain since the shooting - as it beat expectations once again.
The world and their pet rabbit was convinced yesterday that today's jobs number was both the most-important-number-in-the-world and didn't matter (because whether it beat or missed it was bullish for stocks). Seconds after the release that appeared to be true as JPY instantly dragged stocks to record highs (and the USD up and bonds and gold down). However, trumped by confirmation that the taper is continuing, Gazprom warnings, Lavrov threats, and finally reports of a Russian invasion, stocks leaked lower to Tuesday's ramp-day closing levels. Thanks to some last-minute JPY and VIX banging, S&P closed green for the 15th of last 16 NFPs. Despite intraday volatility, the USD ended the week unchanged, gold +1%, silver -1.5% and Treasuries +14bps or so (its worst week in 6 months!). Credit markets continue to be non-believers (with the high-yield bond ETF plunging this week). Critically, after last night's default in China, Iron Ore and Copper futures were crushed and we suspect Sunday night's Asia open could see more fireworks.
Dow Transports surge almost 1% as Nasdaq and many of the momo names started to weaken. The S&P closed at new highs once again despite weakness in HY credit market and a rising VIX on the day. Started by Draghi, EUR strength implied USD weakness and the greenback gave back the week's gains and then some (as AUD is up 1.8% on the week). USDJPY topped 103 - supporting the S&P. Treasury yields continue to push higher (with 30Y +10bps on the week). Gold and silver recovered their Putin losses as the formers ends above $1350. Oil prices tanked all day (testing $100) but reversed hard on chatter of escalation in Ukraine. It seems more than a few traders were hedging into tomorrow's payrolls number with VIX rising and stocks tumbling into the last few minutes (not helped by chatter of a Russian invasion overnight).
Earlier today we were surprised when none other than uber central-planning skeptic, not to mention bond fund manager, Bill Gross threw in the towel and in his latest letter advocated the purchase of risk assets - and Bill Gross is the last person needing reminding that in a day and age when the 10 Year yields just barely over 2.5%, this means not bonds but stocks. The surprise, however, promptly disappeared when we realized that PIMCO is merely the latest entrant in the scramble for yield game following, with a substantial delay to all of its other "alternative" asset management peers, right into ground zero: European toxic debt.
UPDATE: The miss by GOOG and AMZN (accounting for 13% of Nasdaq market cap) is pushing indices lower after hours...
The S&P 500 And Russell bounced once again off post-December-Taper unchanged levels today but the Dow remains flat from 12/18 as the Nasdaq (led by exuberance in momo social media stocks as AAPL closed <$500) jumped the most in almost 4 months (though remains -1% on the year). The rally in stocks was simply remarkable for its tick-for-tick tracking of USDJPY and EM FX and the S&P was unable to make significant progress past its pre-Turkish-rate-hike levels. Treasuries sold off but remain 3-5bps lower in yield than when Turkey was "fixed". The USD rallied on EUR and JPY weakness (but was almost entirely dead once Europe closed). Precious metals were manhandled instantaneously lower at 8amET then spent the rest of the day trying to recover. Stocks did tumble into the close to recouple with USDJPY but bad news was great news it seems...(for now)
S&P 500 futures just crossed below 1,800 - its lowest since the FOMC's taper announcement on December 18th. The cash S&P 500 (and small cap S&P 600) have crossed below their crucial 50-day-moving average (with no sign of dip-buyers yet). This is the biggest drop through that historically critical technical support level since early October. Perhaps more notably, most of the go-go sectors that were heralded by all the talking head momo queens on mainstream media as leading the next leg of stock gains have seen their post-Taper gains gone. From Builders to Banks and Industrials, taper-gains are now a dim and distant memory.
It would appear that the meteoric 300% rise of Best Buy's shares last year was promoted to the general investing public as the renaissance of the on-the-verge-of-bankruptcy warehouse store and sure enough, the world and his mom piled in to chase the momo higher and higher... until today. With a 30% tumble this morning, those momo-chasing moms and pops may be less enamored to buy-the-dip but there was one 'smart-money' insider who was selling as fast as retail was buying. Co-Founder Richard Schulze (who indicated in August he would be selling to 'diversify' his holdings) piled out of the stock through most of the fourth quarter (at a level well above this morning's opening print).
Even Draghi proclaimed anyone calling the crisis over as 'premature' but that was ignored by the fast-money momo chasers looking for where to rotate their cash on the sidelines as US momentum fades. Greece, Portugal, and Spain stocks literally exploded higher this week:
Greece +7.7% - best week in 8 months
Portugal +4.7% - best week in 9 months
Spain +4.98% - best week in 16 months
Sounds right?! Efficient markets, indeed...
New 52-week highs reached 2-month highs (and lows at 1-month lows) as stocks ruged to new record-er highs once again today. Aided by AAPL, the NASDAQ outperformed but the ridiculousness was not limited as TWTR continues its exponential rise (up over 59% in the last 2 weeks). Today's range was small in stocks (except for a strange - likely rebalancing related - 6% rise in the Russell at the open) and volume barely above the lowest of the year. Bonds sold off modestly with 7s and 10s worse at +3.5bps following ths morning's un-fat-finger idiocy in Treasury Futures markets. VIX was banged lower (with a late flourish) to 1-month lows. The USD slipped modestly lower on the day but rallied from the US open but correlations to JPY crossesd were not great for stocks once again. Commodities were quiet with Silver up and gold down (back under $1200).
The S&P 500 is set to resume higher, according to BofAML's Macneil Curry pointing to the week of December Triple Witching as historically one strongest of the year for the S&P500. With fundamentals a thing-of-the-past, paying attention to the technicals in a world of one driver of stocks (Fed balance sheet), for short-term trading signals may have some value. Of course, with an 'event' as potentially huge as the FOMC meeting this week, adding risk on an already good year (when the world already believes a taper is "priced in") may be more greatest fool than momo monkey.
US equities close weak for the 4th day in a row - echoing last week but without some earth-moving data to save them tomorrow as NFP did last Friday. Bonds and gold were also hit hard and the USD was well bid on the day. The USD is now unchanged on the week though (with AUD down 2%) and 30Y bonds are also practically unchanged (though 5Y is +5bps on the week). JPY crosses were unable to get any traction in stocks before Europe closed but this afternoon saw them recouple and lift stocks back to unch on the day - only to disconnect into the close as stocks tumbled once again. The Russell 2000 ended back below its 50DMA (2nd day in a row) despite a ramp to try and save it. New 52-week lows spike to near 4-month highs. MOMO names rescued NASDAQ a little.
Stocks initial knee-jerk "good news is bad news" reaction was a 0.5% plunge in prices and the rest of QE-sensitive assets also reacted in a "taper" way with gold dropping, USD soaring, and bond yields spiking. But the USD strength implied JPY weakness and that just provided the momo ignition for carry traders to lift stocks 1% straight up as the heads-I-win, tails-you-lose trade continues. Gold has retraced some of its losses but the USD and bonds are stil under pressure as the US open approaches.
Everyone knows "you never go bull retard," but it seems Eclectica's Hugh Hendry, the hardiest of hardy Scots, has accepted that there is only one way for this farce to end. As Investment Week reports, the bear-turned-bull has bought 3D printing stocks as a play on trend-driven, QE-fuelled equity markets, and said the rise in the valuation of Bitcoin amounts to “the same thing”. Perhaps summing up the "trend-driven, QE-fueled" new normal better than anyone, Hendry added:"I say to my team 'don't tell me the valuations, it is trending'... This is the environment where Bitcoin could go to $1m. There is no qualitative reason, but it is trending. If I could own Bitcoin, I would. It gets worse: Hendry is now chasing the biggest momentum trend of all, that of Bitcoin, which he now "expects" to rise to $1 million! As for his hedge - don't laugh - 3D printing stocks... Sigh. We suspect, as he noted previously, he will be avoiding mirrors even more now. And yes, that this whole series now reeks of an Onion viral marketing campaign, is clear to everyone. Although sadly, we fear it is all too sincere, and a sad consequence of what happens when Bernanke's centrally-planned markets crush one after another talented asset manager and leave the E-Trade momo babies in charge.