Just like your pet, tech companies like Twitter, Yelp, Bankrate, Groupon and Web.com require constant feeding in order to stay alive
It's Tuesday but not everyone had fun... Having been told by the Fed that small-caps were stretched, investors bid Trannies and Industrials into the green (well the Fed never said they were rich?) Russell and Nasdaq were sold (but only dropped around 1% as every trick in the book was found to "fight the Fed"). VIX slams, JPY ramps, Gold slams... but amid all the furore of the "Sell" momo stocks signal from the Fed, bond markets shrugged (admittedly with some noise) closing flat in 10Y (and modestly higher in yields in the short-end). Gold was monkey-hammered once again, smashed back below $1300 (but remains above June FOMC levels) with its worst 2-day drop in 10 months (breaking its 20, 50, and 100DMA). Biotechs closed worst among Yellen's shorts and Russell 2000 ends -0.65% for 2014.
Everyone knows that you "don't fight the Fed" - and sure enough, traders are selling momo, social media, and biotech stocks, sending the Russell 2000 ands Nasdaq to the lows of the day. Despite the best efforts of USDJPY momentum igniters - which has now shifted to tracking Treasury yields, pushing them modestly hgher. No bounce at all in broad US equity markets (though we expect the spin to be a rotation from growth to value once again very soon). Gold jumped on the dovishness but fell back to unch as did the USD. The S&P 500 is now in the red post-payrolls. Summing it all up - saying that these sectors are 'stretched' but the market is within 'norms' just won't cut it... Yellen is losing control and this level of specificity (and honesty) implies some degree of panic at the Fed.
Surprise... following the worst week for stocks in months (and "most-shorted" stocks biggest down week in 2 years), one is hardly surprised that someone decided the investing public needs some confidence-boosting. VIX was slammed, "most shorted" stocks squeezed higher and all on the back of a USDJPY spike and surge based on absolutely no news whatsoever... Meanwhile, as stocks surge and gold collapses, Treasury yields are up (wait for it) 1bps...
- Secret Path Revealed for Chinese Billions Overseas (BBG)
- Traders Flood U.S. With $3.4 Trillion of Bond-Auction Demand (BBG)
- Just in time to cover bad earnings in a massive $3.8 billion "one-time charge": Citi says to pay $7 billion to settle securities investigation (Reuters)
- Troubled Epirito Santo family loosens grip on Portugal's BES (Reuters)
- BES puts in place new executives after central bank push (Reuters)
- Bank of China-CCTV drama may reveal power struggle in Beijing (SCMP)
- Portugal speeds up Banco Espírito Santo management changes (FT)
- Dark pool probe builds pressure on Barclays boss (Reuters)
- Russia Vows to Respond After Shelling From Ukraine (BBG)
- Ukraine forces end rebel airport blockade (Reuters)
- Obama Contends With Arc of Instability Unseen Since '70s (WSJ)
The Russell 2000 closed down almost 4% from last Thursday's early close - its worst week in 3 months (and in the red year-to-date). The Nasdaq miraculously scrambled back to unchanged from Payrolls but all major indices closed red for the week. Away from stocks, the USD closed unchanged (with notable CAD weakness and JPY strength). Treasury yields tumbled 13bps on the week - the most in 4 months. Gold and silver rose 1.3% on the week to new 4-month highs (6th green week in a row) as WTI Crude slumped back under $101 (-3.3% on the week). VIX rose around 2 vols back above 12 as "most shorted" stocks plunged over 5% - the biggest weekly drop in 25 months! VIX was slammed lower late-on to give the impression of confidence in stocks into the weekend but credit was notably not buying it at all.
While the situation between Israel and Gaza continues to escalate, pulling the markets' attention away from the recent developments in Iraq (as for the Ukraine civil war, forget it), the big news overnight came out of Chine which reported another contraction in consumer prices, which both declined to 2.3% and missed expectations of a 2.4% print (down from 2.5%). Producer Prices had another negative print, the 28th in a row, and have remained negative since 2012. This led to the Hang Seng Index falling at the fastest rate since late June to erase all YTD gains. However, as has now become the norm, macro news hardly impacted US equity futures, which are driven exclusively by the Yen carry trade, which unlike yesterday's pounding, has traded rangebound between 101.6-101.7 keeping US equity futures just barely in the green. We expect the momentum ignition algo to kick in at some point, for absolute no fundamental reason beside the NY Fed trading desk issuing a green light, sending the USDJPY surging, taking the Spoos with them, and helping stocks forget all about the weak Asian session.
The trouble with capitalism’s guardians is that they have no respect for it. Markets have been around for at least 2,000 years. Since then they have evolved in many directions, with fancy and sophisticated techniques… and elaborate systems and complicated instruments that take a PhD to understand. But despite all the brain power put into trying to figure them out, markets still surprise, confound and puzzle everyone. You’d think Janet Yellen and other central bankers would take a step back and stand in awe. Heaven and hell are full of people who thought they could take the risk out of markets. Some went broke. Some blew their brains out... others both.
Poor algos: after they got no love on Monday from the overnight USDJPY selling team which took the all important pair back to the 200 DMA, today, inexplicably (it is a Tuesday after all, and if one can't frontrun a rigged market surging higher on Turbo Tuesday may as well throw in the towel on free money and learn about fundamental analysis) the same overnight USDJPY selling team has pushed the key carry pair to below the 200 DMA, and has dragged US equity futures lower with it for the second day in a row.
So far the 21st Century has not been especially kind to equity investors. Yes, markets usually do bounce back, but often in time frames that defy optimistic expectations. Thhe real (inflation-adjusted) purchasing power of that $1,000 is currently, over 14 years later, only $218 above break-even. That equates to a 1.39% annualized real return.
Uber Launches War Against Yellow Cabs, Cuts New York Fares By 20% As Ali-Baba Launches Chinese Uber CompetitorSubmitted by Tyler Durden on 07/07/2014 11:25 -0400
Curious what Uber is spending the record $1.2 billion in cash it raised in its most recent funding round (which valued it at a whopping $18.2 billion)? The answer: subsidies. In a page right out of Amazon's playbook, the management of Uber has found that the best use of proceeds now that it may have finally saturated addressable markets, is to use its cash on hand to fund sub-equilibrium pricing losses and in the process, hopefully, put its competition out of business. Earlier today, the Uber blog announced that UberX is "now cheaper than a New York City taxi."
"... for now, the message is that the average stock making up the Nasdaq 100 Index is not confirming the bullish message of the NDX’s higher price highs...the divergence does not absolutely have to persist; the market could just power through it, but that is not usually the way things usually work out."
VIX was monkey-hammered lower once again today, lifting stocks vertically to Russell 2000 record highs and The Dow within a point of 17,000. The question is who (or what) is doing it. Nanex seems to have found out who... It appears the un-visible hand of VIX manipulation (that we have shown previously) has been forced into the open public markets as Barclays goes dark. Simply put, massive bursts of 1-lot TVIX orders flood and delay the markets enabling HFTs to manipulate the tail that inevitably wags the market (via VXX, SPX options hedges and leverage) and now that the dark pools are disappearing, we see it all in real-time.
- Facebook Researchers Manipulated News Feeds in 2012 Study (BBG)
- Argentina at Brink of Default as $539 Million Payment Due (BBG)
- Hedge fund correlation risk alarms investors (FT)
- As China Flexes Muscle, Obama Frets Over Rival’s Weakness (BBG)
- As caliphate declared, Iraqi troops battle for Tikrit (Reuters)
- Dubai Caps Worst Month Since 2008 as Real Estate Stocks Tumble (BBG)
- Russian Advisers Ready Iraq to Use New Combat Aircraft (BBG)
- Blackstone Readies Big-Bet Hedge Fund (WSJ) - so what was GSO?
- Pope says communists are closet Christians (Reuters)
- Thomson Reuters revising FX trading standards (Reuters)
Before 330ET, the Nasdaq was the lone survivor in the green this week despite every effort to spark short squeezes and ramps day after day - but that all changed as the ubiquitous late-Friday buying panic occurred of course - lifting stock green for the day (and desperately searching for green on the week). There was a sudden heavy volume dump at 1315ET with no news catalyst amking many wonder if a dark pool puked its orders? A glance at the week's market moves would suggest 'volatility' is anything but low - yet we always manage to close day-to-day calmly. Wondering what provides the ammo for Nasdaq's rise? "Most shorted" stocks are up for the 7th week in a row. Despite all that idiocy, bond yields tumbled the most in 6 weeks and USDJPY fell the most in 14 weeks. Oil slipped on the week but copper, gold, and silver all gained. With the Rusell rebalance, volume was extreme today (but only at the close and that 1315ET dump).