Financials Stumble Amid Average Volume Range Day

Tyler Durden's picture

Bank Of America and Morgan Stanley closed today down around 7% from the 0931ET tick yesterday with BofA managing to defend the $5 Maginot Line once again - though closing almost at their lows. Tech and Financials were the worst sectors of the day (and the only sectors with negative performance) as Energy outperformed dragged by a war-premium-driven Oil price that crossed $100 intraday but ended just shy of it (up 2.5% from its intraday lows). After some early vol, FX markets trod water post the European close, practically unchanged on the day (and DXY -0.7% on the week) as equity markets once again outperformed credit in their illusory manner (though IG and HY did rally some on the day). Correlations continue to deteriorate across a broad basket of risk assets as TSY yields oscillated up and then down and then up into the close but it was Oil and AUDJPY's trend up that supported ES more than anything today.

A glance at the performance of the major financials from right after the open yesterday shows that BAC and MS have been picked-on, JPM and GS are grouped, and WFC and Amex are in line with the broad financials ETF. Citi is outperforming.

UPDATE: The S&P downgrade after-hours of the major financials is dragging ES lower and more in line with medium-term CONTEXT (see below). BAC lost $5 momentarily

ES (the e-mini S&P futures contract) remains considerably above a medium-term calibrated CONTEXT (broad risk basket charted above) but on the day (the below chart - recalibrated for very recent price action), equities appeared to see through the strength in oil and were unable to keep pace with what CONTEXT thought was fair today.

As we entered the last half hour, CONTEXT began to lose ground as TSYs rallied. At times such as this when correlations are lower across assets, the debt-equity framework provides a little more color and equities were well above credit's move on the day.

HYG outperformed HY spreads and IG outperformed HY on the day. The lack of HY strength on a positive equity day does not provide much support for risk appetite. Stocks, much like in Europe this morning, stayed rich to credit all day.

Copper and Oil were the story of the day though it seemed with the latter especially hot as Iran tensions rise. The drop in the USD this week is much more than matched by Gold and Silver which are up around 2% on the week.

All-in-all, a very sideways non-event day in the US which saw correlations drop across asset classes, and once again risk in general un-supportive of equity's strength from Friday lunchtime. Medium-term CONTEXT, we suspect stil provides the footprint for some reality this week and credit's view of the S&P 500 cash index is still around 1164.


Charts: Bloomberg

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Pladizow's picture

BOA = Bend Over America!

Sudden Debt's picture

More like 'bend over world'....


Good point, but the acronym doesn't quite work. ;)

Cleanclog's picture

Ahhhhh, 10 minutes later, Maria mentions the downgrades of BofA, GS, WF . . . oh never mind - let's get back to Home Depot and Lowes.  No big deal on the banks and loving GS forEVER!!!  Even while we never see or hear of Blankfein or Dimon anymore.


Happy Bank Holidays everyone.  

Long-John-Silver's picture

I love Bank Holidays, they always fall on a Monday.

Captain Benny's picture

This time they might keep going on for every day ending in y.  In a zero interest rate environment, be your own banker.  Bitches!

ebworthen's picture

QE3 will be announced if BOA goes below $4.00


Carlyle Groupie's picture

Easy. If you're long you're wrong. There is no better time for the Squid to suck you in than during an `expected` rally.

Wixard's picture

I love me some FAZ. I was expecting a dip which came but damn, S&P made my night. 


Im still gonna drink cheap ass vodka though. I see no need to spend more than 10 dollars on a bottle. 

Carlyle Groupie's picture

Austere wisdom. I hope it spreads Countrywide.

Sudden Debt's picture

Maybe BAC should dilute it's shares with another 5 billion shares?
Maybe city should do the same?

Long-John-Silver's picture

Maybe they keep marching pretty talking heads out in front of cameras to calm the Sheep.

Long-John-Silver's picture

Long Beans, Bullets, and Bullion.

Au_Ag_CuPbCu's picture

Long Beans, Bullets, and Bullion and Booze.  Fixed it for ya.

Waterfallsparkles's picture

That is because every one except the Retail Invester knew about the S&P Downgrade of the Banks.  They pre sold and shorted.

ucsbcanuck's picture

Hope you're right - tomorrow BAC will drop and I will hit my sell targets on my puts.

Bansters-in-my- feces's picture

"Citi is outperforming"

I wonder if that's what $1.3 trillion in free loans helps do...?