Hmmm… Initial rebound after yesterday’s bashing was rather modest, settling on a bit better and awaiting US input. Spain overdid its auction, which looked just good in the sense of being able to say it sold a new bond for size – to its dealers. ECB, happy to have provided the idea of OMT to save the world from simple panic, now going pessimistic (in non-panicky way). It’s just soft out there… It’s the economy, Stupid! And it is weak.
"Bop 'Til You Drop " (Bunds 1,36% -2; Spain 5,84% +16; Stoxx 2479% +0,1%; EUR 1,275)
As the Romney bounce was removed last night, German (and European) growth is lowered, AAPL's dominance is questioned, and the 'fiscal cliff' (oh yeah that) comes into focus, is it any wonder equity markets dumped today. Depending on which index you looked at, equities fell the most in a year (or a month) with the Dow and Nasdaq closing below their 200DMA. Gold and Bonds outperformed and S&P futures plunged further after-hours closing below its 100DMA for the first time in over 3 months (as VIX closed at 19% - its highest in 3 months)
John Williams, president of the San Francisco Fed, yet another noted dove, thinks nothing can go wrong by printing gobs of money. There is no inflation, and there never will be. They have the 'tools' to avert it. Never mind the explosion of the money supply over the past four years – it is all good. Have no fear though, as Williams notes: "Once it comes time to exit its super-easy monetary policy, the Fed will target a 'soft landing,'" The hubris of these guys is jaw-dropping. We are struck by the continued refusal by Fed officials to even think for a second about the long range effects of their policies. In the meantime, money printing continues to undermine the economy. Wealth cannot be generated by increasing the money supply – all that can be achieved by this is an ephemeral improvement in the 'data' even while scarce capital continues to be malinvested and consumed.
Exuberant start (Who knows why?), flat lunch (made more sense…), dismal afternoon (to say the least). EGBs ramped up, as the reality of the last days’ figures kicked in. And suddenly everyone woke up and saw… and bonds were right. Tommy, "See Me, Feel Me".
"Pinball Wizard" (Bunds 1,38% -5; Spain 5,68% +4; Stoxx 2486 -1,8%; EUR 1,276)
Markets have found a good excuse to be on hold. Elections. No real US figures and a tendency to ignore European ones. No shoe dropping means upside, a little. Core EGBs rather firm nevertheless, for choice. Periphery, in absence of news, trading back and forth, so better today. EZ Q4 growth looks like stalling with a catch-up of a more lenient summer. More to come.
"Elected " (Bunds 1,43% +1; Spain 5,64% -9; Stoxx 2513 +0.5%; EUR 1,281)
Today doesn't matter. Tomorrow won't matter either.
Nothing really mattered… Eventually. Europe correcting Friday’s excessive optimism, in line with the US, treading water ahead of the elections. Still, the Periphery remained under (controlled) pressure with Spain cornering most, if not all negative headlines today – ahead of Thursday’s auction. 10 YRS periphery backing up to (selective) symbolic levels of 5% and 5.75% (damn’ near 6%).
We had ended the week on Fri 26 being “On the Road to Nowhere”, which essentially wasn’t that wrong a call, as markets got stuck on Sandy’s path.
So, as last week: Nothing new. Spailout OMT still not in play – and might not be this year's business. Officially. Hmmm... Yeah. Sure. We'll see. Greece, haggling not over.
Big Disconnect between Risk and Reality, Equities and Bonds.
While everyone is loudly patting themselves on the back for getting the electronic exchanges open and enabling a few proud men to wriggle out of positions (or into them) into month-end, we can't help but notice the overall weak tone of equities. The S&P 500 cash markets proclaim a very small green close but after-hours futures are getting hammered. The Dow is only -10pts (but with IBM and HD alone accounting for 25 points of gain!), The Nasdaq is leaking painfully as AAPL traded down exactly as we thought - inched back above VWAP and tumbled into the close -1.5%. Broad risk-assets, which had been indicating a lower move in US equities, kept on sliding and stocks stayed with them all day as correlations picked back up. Treasury yields are 4-6bps lower than Friday's close, the USD is down around -0.12%, but Gold and Silver are up 0.6% on the week now. Oil slipped (after a European close spike and dike) and Copper slid from the US open. The main story of today is the crash in S&P 500 futures after-hours to the lows of the day (down 8 points from its cash close).
- In Darkened NYC, Safety On The List Of Concerns (AP)
- New York Subway System Faces Weeks to Recover From Storm (Bloomberg) ... as we said
- Power Outages May Last More Than a Week (WSJ)... same
- U.S. stock markets to reopen on Wednesday after storm (Reuters)
- Questions Cloud Market Reopening (WSJ)
- Apple revolution shows signs of reboot (FT)
- Euro Chiefs Set to Grant Greece Extension Amid Squabbles (Bloomberg)
- Italy Bank Poll Casts Shadow Over Savings (WSJ)
- Shocked UBS staff take to Twitter (FT)
- Corporate China hit by unpaid bills (FT)
- Panasonic Posts Loss of Nearly $9 Billion (WSJ)
- BoJ independence called into question (FT)
- Barclays hit by fresh U.S. investigations (Reuters)
- Adoboli’s Girlfriend Said Confess, Co-Worker Said to Run (Bloomberg)
Because while to ConEd, the bulk of New York south of 34th Street can operate without electricity for days, the stock exchange must.be.online.or.else.the.terrorists.win:
- NYSE TO OPEN FOR NORMAL TRADING OPERATIONS ON WEDNESDAY
- NASDAQ STOCK MARKET, OTHER NASDAQ OMX-OWNED EXCHANGES OPEN WED
Why? Just so hedge funds can square away position for month end. In other news, CNN furious trying to figure out how the NYSE TV stuido in downtown Manhattan (because all the trading actually takes place out of a fortress in Mahwah, NJ), can operate under 3 feet of water.
UPDATE: *CBOE TO CLOSE EXCHANGES OCT. 29 BECAUSE OF HURRICANE SANDY
Late Updates - after a day of consultation and realization that if the algos were left alone to play then things could go a little pear-shaped - NYSE and NASDAQ will now be totally closed tomorrow:
*U.S. EQUITY MARKETS TO CLOSE ON OCT. 29 FOR STORM, SEC SAYS
Uhhhh. It just couldn’t last. Risk had been pushed higher and higher in anticipation, but a combination of reality-check, rather unsettling Q3 earnings and renewed Spanish jitters just made players come down hard from their previous week’s high flying exercise.
Spailout OMT still not in play. Greece, haggling not over. Earnings rather bad. PMIs dismal. Central Banks on hold, as everything is on the table, at least for the moment.
As we noted this morning, today seemed more about defense than offense (even though stocks managed to rally off Draghi's Dike twice). Dow 13,000 and S&P 1400 remain safe. Today's theme is 'V-shaped-recoveries' as AMZN managed some magic last night, AAPL managed some super-magic intraday - bouncing off its 200DMA and then fading into VWAP to close on volume, and S&P futures oscillating between post-Tuesday highs and lows all day (with the ubiquitous dump to VWAP into the close after the 3pm ramp on cue)...
Chuck Schumer to Kevin Henry: "Must close green, Mr. Henry"
— zerohedge (@zerohedge) October 26, 2012
If it wasn’t because the government sponsorship doping Q3 US GDP, we wouldn’t have much on the bright side.
European equities still desperate to shoot up. Feels like too many fickle shorts and too many uncomfortable longs at the same time.
Markets uneasy after round-tripping back to OMT / QE unleash levels and no follow-up stimuli to be seen.