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S&P Slips To 4-Week Lows, Russell Red For 2014 As Rate Hike Fears Trigger Selling
With BofAML, Goldman, and now JPMorgan all bringing forward their 'liftoff' expectations for rates, US equity and bond markets are starting to quake a little. The Russell 2000 is now back in the red for 2014 and all but Trannies are red for September. The S&P is back to Aug 20 levels as 10Y yields push 15bps higher on the week to 2-month highs over 2.60%.
S&P loses 2,000 and slides to 4-week lows...
Pushing all but Trannies red for September...
and Russell red for 2014
But bonds and stocks have a long way to go to converge...
Charts: Bloomberg
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We already showed BofAML's warnings; here is JPMorgan's
Regarding our own Fed outlook, we now look for a first hike at the June meeting next year, which is both earlier, and more precise, than our prior call of Q3. As the timing of the first hike draws closer, it becomes appropriate to convey our outlook by meeting, rather than by quarter. The Fed has shown a propensity to make important decisions at meetings that are followed by press conferences. In next year's calendar such a meeting in Q3 does not occur until late September, which could be too late given the ongoing improvement in the labor market. (Of course, they could, and maybe should, switch to having press conferences at every meeting). Another factor motivating an earlier first move is the apparent revision to the exit principles. The old principles had halting reinvestments and large-scale reserve draining occurring prior to the first rate hike, both of which would have been "baby tightening steps." With those steps no longer likely to occur before the first rate hike, the timing of that hike should be pulled forward. Finally, Fed rhetoric has turned marginally more hawkish in recent months.
We see the first hike in June as a 25 basis point increase in the target funds rate corridor, to 25-50 basis points. We see subsequent moves in September and December bringing the corridor to 75-100 basis points by year-end. (Given the FOMC's convention of rounding the funds rate target up to the nearest quarter point, this would put our "shadow FOMC dot" at 100bp). Now that the public seems to be making its peace with the fact that rate hikes are coming, the question has increasingly become the pace of those hikes. We think the Fed can afford to stick with its plan the normalize rates gradually, at least initially. The first few hikes will involve some delicate issues for the plumbing of the interaction of the Fed balance sheet with the banking system, which should warrant caution. Moreover our economic forecast does not have enough inflation pressures next year to force them into a more aggressive tightening pace in 2015. We see a somewhat more aggressive pace in 2016, with the funds rate reaching 2.5% by year-end.
Who could have seen a rise in equity vol coming?
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Rate hike?
Sure they will........
http://uncovercalifornia.com/content/21581-california-s-august-home-sale...
GODAMNIT!! KEVIN!!!
A rumour is as good as a reality in the new unnormal.
Sad but true. I dont think the Fed will ever actually raise rates. They will threaten to but wont. Even if they said they did would it even matter? Its all lies anyway. Cant prove or disprove anything these days.
No, they have done nothing yet.
If they raised rates to 8%, your money in the bank might cover inflation.
That is until the next engineered financial crisis (it will happen on a weekend of course) and the banks bail you in and take everything.
Until then..
Rate Hike? To what?
They will shoot their wad and blow a steaming turd load in their 4.5 Trillion dollar ballance sheet ass's if they get to 2%.
Sheesh!
Awwwh. What a shame; I feel so baaad for the little stawk market poopies.
Mee two..
All dos widdle Be The Fucking Dopes.
Wut will day doo?? Wut will day dooo!!??
I tried to tell them:
http://www.zerohedge.com/news/2014-09-03/nasdaq-tumbles-red-week-sp-cros...
But nooooooooo...
I am STILL long the VIX, bring the volatility already!
I knew there had to be a reason we suddenly 'well off of the lows.'
I think something is wrong with my tablet, it's showing all the stock numbers in red instead of green like it's supposed to. I'm going to take it in to have it looked at tomorrow, hope I don't have to buy a new one.
Right, people are selling because the fed might hike rates in a year.
"RATE HIKES"???
Dream on. They can't. They don't dare. BOXED-IN FED.
.00000000000000000000000006
to
.00000000000000000000000007
Now that's Bullish!
The sad thing is, if they actually made a move like that... the interest payments on the federal debt would still eclipse the annual tax revenues.
I dare them too, this year is still going to produce some fireworks.....
So doesn't the bottom chart imply that a yield spike to 4.5% would validate current SPX levels? So a yield spike would be good and BAC/GS/JPM are bullshitting once again.
Wall Street pussies threatening a collapse if they don't get their way again. Boo fucking hoo.
With all due respect to zerohedge, that chart is baloney. This infatuation with "recoupling" charts based on short-time periods is a bit too much.
We see a somewhat more aggressive pace in 2016, with the funds rate reaching 2.5% by year-end.
yeah, uh huh
that would tack on a couple hundred billion a year to annual fedgov deficit.
not gonna happen
anyways, we'll be in a recession before then
All part of the long term plan. Fluff the markets which creates '$'s so the market can be popped and all that money gets to go into bonds for no interest rate. This in effect covers the debt burden. They keep doing this over and over.
I'm pretty aggressively short here for many reasons and with leap puts so I can't be forced to cover and have limited risk.
Sign #1) LEAP calls only pricing in index rise of 5%.
2) Just about no one short.
3) Stock prices for some near 10 times overvalued and looking for profits 3-5 years out.
That sounds plausible
Memo to zerohedge, regarding the chart "bonds and stocks have a long way to converge" ...you are implying that long term treasuries and the stock market will be positively correlated, i.e. both will fall in prices, as QE ends.
Based on prior end of QE episodes (and common sense), this is not what happens. Correlation goes back to normal - negative - if stock markets finally correct after one of the longest periods ever without touching it's 3-year one standard deviation channel, then yields should fall.
The selloff in bonds and equities is due to $20 plus billion in new supply coming next week. alibaba and more.
issuance of equities should have no effect on treasury bonds. unless you work for the MSM and everything is a negative for treasury bonds.
so true ... the banks want their perfectly sloped yield curve back ... but alas, their wish will lead to big drop in demand for loans.
I follow the long end closely ... anytime QE has ended (Federal Reserve balance sheet neutral) yields have DROPPED.
The exact opposite of what all the "experts" claim
There have not been many opportunities to buy bonds cheap lately. Bring it on.
i got your six
i've been "all in" long bond for years ... i'm not going anywhere till 10yr yield hits 1%
My concern is the NY FED. I don't trust that organization and their inner motives to do the opposite of what is in the best interest of the public.
Had a feeling yesterday's Russell love-fest was just a machine trick to blast existing shorts and create a new "improved" entry point. Hexadecimal bastards ...
(Thanks, TZA, for working 3X harder than the other funds :) )
Got myself some TZA too, 10k worth. Figure it'll turn into 100k one day.
All the big crooks are out of the market. I can see them telling the Fed to smash it pretty good here. Hell a 20% "correction" SnP still at 1,600 (still overvalued) but that would coincide about right with the unleashing of the QE motherload.
Yes anyone noticing noticed the billionaires were pulling out and we got the typical daily upgrade cycle from the banks trying to hold it together.
FED software does not have fears.
BTFD
And a bearish coment from ZH starts the climb back to dow 17000.Like clockwork. please just shut up!
That has proven true many times.... lol
16,908 Dow down 135 points. Thats what Finviz.com Futures was showing for quite a while this very morning. Thought it kind of strange at the time. Then again could or would the dark forces out there not want to signal some people in advance. I'm not crazy nor conspiratorial but it would be something to watch for people if this plays out.
Not even a ZH post can keep the market up? Something big is gunna happen this wekend me thinks.
I have the same feeling...but I get it every Friday...fill the tank, stock up the frig, prepare for the Zombie Apocolypse...check, check, check
I wind up having to go back to work every Monday and having wasted another weekend fondling the yellow discs in my sock drawer.
Set up for massive BTFD rally when the Ponzi Munchkin sticks to the dove script.
How do all the top players from all the articles we've seen assume that they will all be able to tell when to sell and that selling all at the same time was possible.
This is one of those things that we will look back on.
Tightening? Higher rates?? Less QE???
People obviously didn't believe Bernanke.
Or even most ZH analysis that says it can't happen without disaster.
They may change the names, but the policies aren't going to change because they have no other one
to go to.
Buy the CAD/AUD pair. PMs and energy are also way to low to hold there for much longer.
it was real hard to read a negative bias on that s&p daily.
real hard.
the real story is the RLWK manipulation today.
frauds everywhere
Kevin going to load the boat with BABA? Wasn't there a black sheep by that name or was it a black swan?
dammit Yellin...where's our 5 billion Friday? You know how we'll do without it! U tryin' to kill this market? It IS your responsibility!!!!
Time to BTFD?
"Off the lows".