POMO Pump Rescues Stocks Again But Risk-Assets Fade

Tyler Durden's picture

In the old days, it was Fed via POMO to stocks; but given the new normal, now we have levered POMO to rescue us via vol compression and yet again - today saw risk-assets sliding all night (though admittedly only around 0.5% off highs) only to be rescued by a vol-compressing equity push that started the moment POMO finished. HY credit was tinkered with in the last hour to keep things afloat and of course AAPL soared into its earnings report. The debt-ceiling vote did little to maintain risk-on as CAD weakness (BoC holding off from rate hikes) pulled the USD higher, and hurt risk-on commodities - as Oil plunged on the day. Treasury yields continued to fall - entirely ignoring stocks once again - even though stocks caught down to risk early and ended at new five-year highs on the Dow (thanks almost entirely to IBM). So low volume in stocks (AAPL decent volume), low average trade size in S&P futures, and a disconnected equity market from bonds and FX once again... eyes down for an Apple full-house...

Correlations between stocks and risk assets broke once again as POMO finished...

 

and after AAPL reported... Stocks collapsed back to Bond and FX reality!!!

 

CAD weakness pilled the USD up (and via its carry impact the rest of the FX complex)...

 

Commodities shifted on the CAD impact on the USD and on the debt-ceiling vote...

 

The disconnect remains...

 

and across asset classes - stocks are now negativelycorrelated to risk (lower right) - ETFs realigned (with VXX balancing HYG weakness). With USD up and Tresasury yields down, the upper right chart shows the widening disconnect once again this afternoon...

 

Charts: Bloomberg and Capital Context

 

Bonus Chart: Dow Transports having best year since crisis...