Apple Closes Over $600 As Trading Volume Collapses Again
"Whocouldanode?" that Apple would do something like pay a de minimus dividend and begin a modest buyback program? Indeed, initial reactions for the stock seemed to be 'sell the news' but of course, it wouldn't be a day ending in 'y' if Apple didn't close green and sure enough, with seconds to spare, Apple managed to close over $600 for the first time. BofA, not so much. After pinging $10 (a healthy double of recent lows), chatter of a secondary began the process of 'normalizing' its recent behavior (the stock is still up 17% post JPM-divi/Stress test news, a whopping 10% better than any of its peers in that 4 day period). The leak in financials dragged on the S&P which limped back lower to close almost perfectly at its VWAP as NYSE trading volumes (after almost record-breaking high levels on Friday OPEX hedge removal day) dropped back to near their lows . Credit outperformed equities today but its a very 'technical' day for credit in general with the CDS/index rolls tomorrow (meaning the major credit indices will move to new maturities and new components) though HYG staggered notably early in the day. USD and Treasury weakness were the headlines of the day (aside from AAPL of course - which apparently has a great new screen) which of course helped commodities rally with high-beta Silver the best on the day +1.2% from Friday and WTI breaking $108 as Gold limped higher (tortoise-like) over $1660 at the end. VIX rose once again and the term structure flattened a little but once again post-OPEX and futures roll, there are some more difficult apples-to-camels comparisons there.
HYG (green) dropped rather notably in the late morning (around the time of the European close) but staged a magnificent comeback as stocks limped higher overall. Whether this was overnight hedged into the credit roll that was snatched up by ETF arbs or just another algo save is unclear. We would expect anyone who needed to hedge to use HYG more than HY today heading into the roll. HY and IG stayed in sync as we suspect reracking off stocks and very light flows into the roll left them dangling near their intrinsic values.
Financials lost their loving feeling as BofA slid over 6% off its intraday highs. We noted in an earlier tweet that BofA has huge amounts of TLGP debt due in the next few months (which are on the books at exceptionally low costs of capital). We note they got a smallish 5Y deal off today at T+275bps so unless they are planning on another juicy DVA spread play, earnings will take a notable hit in Q2-3 from significantly higher debt costs. Of course, post JPM, BofA remains the huge outperformer so why not use this dislocation to raise a secondary...seems unlikely though that they could issue bonds today and not disclose some kind of secondary is coming but then again- MF Global...
Silver was the big winner on the day as Copper and Oil rekindled their synchronicity and Gold underperformed USD's weakness on the day managing only +0.25% from Friday's close.
Treasuries managed a decent overnight rally but as activity picked up this morning so Treasury yields popped higher again - up 7-8bps from Friday's close with the 2s10s30s (or the hump-shape/butterflies that twist seemingly pressured down) coming unwound en masse as 2Y outperformed and 7Y underperformed.
We can't help but feel like a lot of short-squeeze / hedge ammunition has been taken from the market post-OPEX (volumes were crazy on Friday, VIX has been leaking higher again, and credit protection buyers won't enter heavy until after the roll now) as the Greek CDS auction went off without a hitch (as we said it would - and did during LEH) and all those crisis hedges set for MAR expiration at the start of the year died out of the money.
NYSE Volume is 25% below Q1 2011 levels on average. The volume traded on Friday was exception all by any measure and yet today we fall back to our old patterns of low volume limp higher.
Today was also the highest average trade size for the ES (S&P 500 e-mini futures contract) since July 1st 2011 - dramatically higher than recent average levels.
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