Equities Close Week Red Even As Hilsenrath Prevents Rout

Tyler Durden's picture

A 10 point rally off the lows, thanks to a well-timed Hilsenrath-rumor, dragged stocks up to their day-session opening levels (and unsurprisingly perfectly to VWAP) and while bonds/FX/spreads all limped along with stocks in the last hour, broad risk assets were not as excited by the rumors as the NASDAQ and S&P seemed to be. US equity indices are all lower from Friday's close (with NASDAQ least worst) but they remain +1.3% (S&P) to +3% (NASDAQ) from pre-EU-Summit levels. With the USD ripping higher (on EUR weakness as much as QE-hope fading) up over 2% on the week (with EURUSD -3% on the week and JPY the only 'major' stronger as carry unwinds hit), commodities plunged (growth questions and QE-less) ending the week at their lows (except for WTI - which traded lower on Monday) as Gold outperformed (down only 0.85% on the week). Treasury yields dropped 5bps or so today - leaking back higher into the close but ending the week down 7-9bps (notably less sanguine than stocks). Staples were th eonly green sector on the day as Tech lagged along with Industrials. While the Financials sector fell 0.8% (with a nasty leg down into the close), the majors did worse as MS and BofA caught-up with JPM's post-summit weakness. Most interestingly, the late-day surge in stocks (which saw decent volume and average trade size as we crossed VWAP) was accompanied by a collapse in volatility. VIX ended the day down 0.4 vols at 17.1% despite a 9pts loss in ES leaving it notably cheap relative to credit/equity fair-value.

Shock-horror as equities close red two days in a row after a coordinated central bank easing... all indices ended the week lower (though NASDAQ marginally) but remain up from pre-summit.

S&P 500 e-mini futures ended the day just above their 50DMA on better volume than yesterday (just below average) and a decent rise in average trade size overall...

The morning session saw stocks catching-down to yesterday's less than exuberant behavior in vol/credit/rates (upper left) recoupling for much of the middle of the day - only to lose it again into the close as stocks had a mind of their own. Correlation across broad risk assets picked up notably (more systemically) as seen in the lower right chart but the late day surge in stocks was far less impactful on broad risk assets (upper right). VIX remains an enigma wrapped in a riddle as the ramp into VWAP - on whatever rumor there was - was clearly levered by selling vol hard as VIX cracked lower and notably away from fair-value given equity/credit perspectives (lower left)...

Stocks underperformed relative to high yield credit markets as they revert to bond's less exuberant levels...

 

Across the major QE-sensitive asset classes - aside from Gold's spike and dive at the NFP print - things moved generally in sync lower (yields lower and USD higher inverted on the chart) though the ES ramp is clearly a little on its own out there...

Commodities all ended the week lower (thanks as much to USD strength as growth weakness) with Gold losing the least...

VIX and the S&P 500 were very strange today as the ramp-fest into the close was all premium-selling love-ins driving VIX lower than yesterday's lows as stocks ended notably lower on the day... just look at the crashtastic drop in VIX from around 220ET!

but the picture gets a little clearer on a multi-day basis as it seems the immediate grab for protection into NFP drove Vol very rich to equity prices - especially yesterday - and today's late day ramp (and dump in Vol was probably those ST-levered VXX players coming undone and being squeezed out by the rumor or lack of real implosion)... VIX still looks a little cheap here to us...

Financials in general remain positive still from the mid-afternoon Thursday rumor-to-news EU Summit sugar-high (except JPM that is) but today saw them continue yesterday's trend of giving back more of those ill-gotten gains...

Charts: Bloomberg and Capital Context

 

Bonus Chart: Super-Long-Run CONTEXT comparing broad risk assets (as they were correlated in the first quarter) relative to US equities continues to send very different messages (since May's disappointing NFP print the equity market seems fixated on one thing only while broad risk assets have stumbled along the bottom). This is not a 'trade' suggestion but does offer some insight into the differences between cross-market relationships over the last few months as equities seem full-of-it.