- Berezovsky Died of Hanging Without Struggle, Police Say (BBG)
- BRICS Nations Plan New Bank to Bypass World Bank, IMF (BBG)
- China pledges more investments to Africa (FT)
- BOJ's Kuroda signals targeting longer-dated JGBs (Reuters)
- North Korea orders artillery to be combat ready, targeting U.S. bases (Reuters)
- Supreme Court to take up gay marriage for the first time (Reuters)
- U.S. Cracks Down on 'Forced' Insurance (WSJ)
- Japanese courts press Abe on electoral reform (FT)
- Vietnam accuses China of attack on fishermen in South China Sea (Reuters)
- Italy's High Court Overturns Knox Acquittal (WSJ)
- Facebook’s Zuckerberg Said to Explore Forming Political Group (BBG)
There is a lot of strangeness out there today - though that in itself is not so strange anymore. Spanish and Italian (and Portuguese) bond spreads rallied back to only +12bps on the week (but Spain's equity market is rolling over (down 2.5%) into the close. The S&P, Dow, and Nasdaq are all pushing unchanged on the week (ignoring Cyprus) but the Dow Transports is plunging (as FedEx is smashed lower on the biggest volume in 6 months). 2Y Swiss rates have dropped to their most negative in 2 months as safety is chased and we suspect the EUR strength (a 100 pip pop on yesterday's US close) is much more repatriation flows than risk-on confidence flows. US homebuilders are bid (+2.2% on the week) as hope springs eternal for high-beta chasing and a UK housing bailout. European credit markets have not recovered from Cyprus, while stocks... have.
Stocks bounced off yesterday's lows on the "no" vote from Cyprus led by a miraculously visible hand smashing EURUSD (and implicitly EURJPY) higher instantaneously (BIS or banks repatriating in a hurry). That faded after S&P 500 futures touched VWAP and major volume was dumped but stocks, after an ebullient morning reaching into the green from Friday, fell back once more, only to exhibit the low-volume liftathon on ECB 'no news' to green into the close (for the Dow). Treasuries practically ignored the hyped up pump in the last hour and ended at their lows yields of the week (down 10-13bps) - 3-week lows. VIX surged on the day but drifted back a little into the ramp ending at 14.5% +1vol. FX markets reverted like stocks in the afternoon but the main theme is EUR weakness and JPY strength (carry-off) and despite the USD strength, gold pushed higher to $1612. The S&P and Nasdaq ended the day red (at VWAP) while the magic of the Dow closed it green - once again hedging dominated actual selling for now.
The stock market has now been up for ten straight days. Many on Wall Street are singing “Happy Days Are Here Again.” For them, that is probably the case. They finally have something to sell that will bring the rubes back into the markets. We are not in Kansas anymore. Fear is ebbing and greed is coming back. Those on the outside looking in are rounding up cash so that they don’t get left behind. The shills assist them with their pictures of economic recovery, new era crap and whatever other nonsense they can peddle successfully. So the cycle goes, as it has since the New York Stock Exchange came into existence. We are in another game of musical chairs where the music is playing joyfully. As in all such events, there are too few chairs to accommodate the participants when the music stops. And it always does!
- JPMorgan Report Piles Pressure on Dimon in Too-Big Debate (BBG)
- Employers Blast Fees From New Health Law (WSJ)
- Obama unveils US energy blueprint (FT)
- Obama to Push Advanced-Vehicle Research (WSJ) - here come Solar-powered cars?
- BRICs Abandoned by Locals as Fund Outflows Reach 1996 High (BBG)
- Obama won't trip over Netanyahu's Iran "red line" (Reuters)
- Samsung puts firepower behind Galaxy (FT)
- Boeing sees 787 airborne in weeks with fortified battery (Reuters)
- Greece Counts on Gas, Gambling to Revive Asset Sales Tied to Aid (BBG)
- Goldman’s O’Neill Says S&P 500 Beyond 1,600 Needs Growth (BBG)
- China’s new president in corruption battle (FT)
- Post-Chavez Venezuela as Chilly for Companies From P&G to Coke (BBG)
Because all that matters is the Dow, as one intellectual giant noted - whether we close red or green "psychologically, we closed positive." Unfortunately, AAPL closed at its lows, Nasdaq -11 points, S&P 500 futures in the red perfectly balanced at their VWAP (which saw nothing but selling all day) for the fifth lowest volume day of the year (following yesterday's lowest volume day). The S&P stayed in its uptrend channel as the USD-Stocks correlation algos gave up today - as did the Treasury-Stocks algos. 10Y closed -3bps on the week (-6bps today). HY credit closed at its lows, VIX rose 0.75 vols today at 12.3% - leading stocks south, and while commodities pulled back off early spike highs, they are all in the green on the week (with gold just shy of $1600 intraday). While it is of little import as the sixth consecutive all-time Dow highs is all that counts for the headlines this evening, we would note that we haven't seen such weakness in AAPL and selling pressure at VWAP in S&P 500 futures for a while (and that was with a 19/30, $650 to the sell side MOC in the DJIA).
Another Friday, another green close (now ten in a row) as Treasuries suffer their biggest weekly yield rise in a year. Another new-er-er all-time nominal high for the Dow but Nasdaq was the winner on the week (+2.7%) against a cluster of the rest at +2.4%. Volume was sub-par at best, trade-size low, and market breadth diverged bearishly but that didn't matter. Financials, Consumer Discretionary (and builders) were the sectoral winners up around 4%. Away from stocks, things are moving quite seriously: the USD is up for 5 weeks in a row - its biggest 5-week run in 9 months (and highest in 9 months); WTI crude outperformed in commodities (despite the USD strength) back up to 6-week highs; JPY had its worst (which is good apparently) week in 23 months losing 2.5% against the USD back to almost 4-year lows; Silver and Gold had their best (and only positive) week in 5 weeks. Credit markets (like TSYs) played catch up and snapped tighter on the week (even though HYG tended to underperform). VIX did drift lower (-0.5 vols to 12.5%) but remains well north of where stocks would expect. The much-vaunted late-day ramp came as usual and lifted all the indices to their opening (post-NFP spike) highs. As a gentle reminder, the Dow is up 613 points in 9 days - that is all.
New highs will become a daily headline feature it seems until we actually have a down day.
Thursday, Jobless Claims fell (340K vs 347K previous), Productivity (-1.9% vs -2% previous) and Costs (4.6% vs 4.5% previous) were very poor reports, and the Trade Deficit grew (-$44.45B vs -$38B). Lastly, Consumer Credit expanded to $16.2 billion from $14.6 billion primarily on student loans (in a bubble) and auto loans (subprime auto loans booming).
Another day, another highest ever close for the Dow. However, away from the silliness of that index, the S&P scraped a small gain and the Nasdaq a small loss as volume and the day's range was its lowest in two weeks. Treasuries were weak, adding around 3-4bps on the day (10Y 1.94%), now up 10bps on the week - catching up to equities. The S&P was unable to get away from its VWAP today and churned as HYG (high-yield credit) closed red and VXX (vol) closed green in the face of equity's positive drift. Silver jumped 1.25% on the day (and Gold about half that) back over $29 in the face of USD strength (driven mostly by JPY weakness). It seemed today was a catch-up day for the rest of risk-assets as arbs dragged bonds and FX carry markets up towards equities. Spot VIX hardly moved from its 13.5% opening as it is quite clear protection of gains as opposed to adding is the name of the game here for now.
- Must defend against Chinese colonial expansion and get the Nigerian oil: U. S. Boosts War Role in Africa (WSJ)
- BOJ nominee Kuroda sets out aggressive policy ideas (Reuters)
- China becomes world’s top oil importer (FT)
- Baby Cured of HIV for the First Time, Researchers Say (WSJ)
- Obama to nominate Walmart's Burwell as White House budget chief (Reuters)
- Wal-Mart Anxious to Combat Amazon’s Lead in Web Vendors (BBG)
- Nasdaq executing trades at a loss (FT)
- Spending cut debate casts pall over Obama's second-term agenda (Reuters)
- Russell Indexes to Reclassify Greece as Emerging Market (BBG)
- Bond Bears Collide With Swaps Showing Low Rates (BBG)
- Buffett Deputies Leaving Billionaire in the Dust Get More Funds (BBG)
- Brazil's leftist president fights to win back business (Reuters)
- U.S. Special Forces train Syrian Rebels in Jordan (Le Figaro)
- Carlos Slim Risks Losing World’s Richest Person Title as Troubles Mount (BBG)
Though a gold bull, I called for a correction late last year and believe more downside is likely from here.
It looks like the Dow Jones Industrial Average will be the first major U.S. equity benchmark to breach new highs, so ConvergEx's Nick Colas breaks down this closely watched measure of domestic stock prices noting that the Dow is a quirky “Index” – price weighted (not market capitalization), compact (30 names) and fundamentally global (lots of brand-name multinationals). Change just one name in the index, and the outcomes vary considerably. If Google had been added at the end of last year, we’d be at 14,330 – well over the old high of 14,165. But if the Dow committee had added Apple instead, the index would have closed at 13,475 yesterday, up less than 3% on the year. And if Netflix had been the lucky company added for 2013, well… We’d be saying hello to Dow 15,000, and then some. The point here is that the notion of a “New High” for the Dow is a little arbitrary, by virtue of the price weighting function and stock selection process.
Hedge fund icon Stanley Druckenmiller sat down with Bloomberg TV's Stephanie Ruhle, saying that he’s decided to speak out now because he sees "a storm coming, maybe bigger than the storm we had in 2008, 2010." His fear is that the ballooning costs of Social Security, Medicare and Medicaid (which with unfunded liabilities are as high as $211 trillion) will bankrupt the nation's youth an pose a much greater danger than the debt currently being debated in Congress. He said, "While everybody is focusing on the here and now, there's a much, much bigger storm that's about to hit... I am not against seniors. What I am against is current seniors stealing from future seniors." While not exactly Maxine Waters' sequestration-based 170 million job loss, this concerning interview is must-see for his clarity and forthrightness from who is to blame, to the consequences of gridlock, our society's short-term thinking, and the concerning demographics the US faces.
Stocks surged their most in 2013 today on slightly above-average volume as the Dow pushed towards its all-time closing highs and Transports went vertical (up 3.5% in Feb). While it no longer matters, it is worth noting that Treasuries and FX markets were not partaking as a broad basket of risk-assets suggests the S&P going out 20 points rich to reality. Materials are stil -1.5% on the month and Staples are leading +2.4%. In the last hour, the S&P even left behind its main driver - VIX - as the 'fear' index could not break below 14.5%. Of most notice today was the fact that equities have retraced all of their losses from the Italian election headlines and recoupled with gold on the week. The high-yield bond ETF HYG rose along with stocks but also notably the underlying HY bond market actually saw selling pressure as HYG's intrinsic value dropped markedly. Late on, trade size rose notably as S&P futures touched the under-side of the 3-month up-trend channel.
Equities dead-cat-bounced today on minimal upside volume (and low average trade size) to get the S&P back to unchanged for the month. Broadly speaking risk-assets stayed well correlated with stocks though bonds and the USD looked somewhat dead trading in a very small range given recent shenanigans. Gold and Silver had their best day of the year so far as the former broke back over $1600 (and has now seen the best 4-day jump in 6 months). It seems Bernanke's relative dovishness is losing its equity appeal (as gap prices continue to rise) but precious metals (post China new year) have rediscovered some central bank balance sheet reality. Homebuilders, buoyed by the craziest seasonal adjustments ever to sales, swung from worst-to-first on the week. Equities tracked spot VIX most of the day but even VIX did not fully partake of the exuberance in the last hour or so. AAPL's rumor-driven tom-foolery pushed it handily up to yesterday's closing VWAP +1.4% and supported the broad equity market (just as HD did in the Dow). Despite the best efforts of the media, putting lipstick on this pig day after yesterday is a push in our view.