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Market Snapshot: Worst Quarter For S&P 500 Since Q4 2008 And Second Best Ever For TSYs

Tyler Durden's picture


Equities ended on a very weak note, bringing the worst quarter since Q4 2008 for the S&P500 to an end. Stocks remain, perhaps remarkably to some, expensive relative to credit markets - especially HY which is feeling significant pain as issuance volumes drop 75% in the quarter to their lowest since Q2 2009. While stocks dropped around 2 standard deviations from a long-run mean, Treasuries did even better and rallied around 3.5 standard deviations - the second largest percentage shift in yields ever (once again Q4 2008 was the only better). Truly a remarkable day, week, month, and quarter and to be frank, one that shows no signs of slowing.

Quarterly percentage change in S&P 500 - down two standard deviations - highest since Q4 2008.


With Financials and Industrials bearing the brunt down around 19% and Utilities outperforming on the quarter in the US.


Quarterly percentage (yes I know that's a little odd but given the range of yields over the period we thought it would make sense) in 30Y Treasuries - down 3.5 standard deviations - second largest drop ever.


Since the end of QE2, there has been significant weakness (obviously) and we recommended a QE-Unwind trade back on May 16th. It has performed rather well - besting the S&P 500 by over 21.5%.

Somewhat interestingly though, the US remains the best performer among global equity markets (in USD terms) with only Mexico and Switzerland beating it in local currency terms for the quarter. S&P 500 -14.33% QTD, Dow -12.09%. Perhaps more notable is the year-to-date numbers where US equities are the clear winner (so far...) and the Dow down only 5.7% (S&P -10%) - last two columns for local and USD-based returns.

and finally with everyone talking about the big rotation-allocation trade from bonds to stocks - bear in mind that these reallocations are not done in a vacuum but based on a risk-budget and the change in the VIX this quarter just broke all records - with a 4 standard deviation jump on the quarter - perhaps now the bonds vs equities divide will narrow as we have discussed at length (drawdowns and risk-returns).

A few other fun facts:

  • S&P 500 in constant USD terms (adjusted for DY that is) -9.8% QTD
  • Gold still managed +8.2% QTD while Silver lost 13.85%
  • Oil lost 18.95% on the quarter while Copper lost 27.6%
  • HYG (HY bond ETF) lost 9.3% while LQD (IG bond ETF) gained 1.98%
  • IG16 (investment grade credit spread index) widened 48bps (price equivalent from 100.4 to 98.3 or around 2% loss) while HY16 (high yield credit risk price) lost a huge 11.3%!
  • oh and NFLX -56.9% & MS -41%!!!


Charts: Bloomberg


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Fri, 09/30/2011 - 16:30 | 1727353 Josh Randall
Josh Randall's picture

ROCKTOBERFEST here we come, B!tchez!

Fri, 09/30/2011 - 16:34 | 1727379 GeneMarchbanks
GeneMarchbanks's picture

Dow rape to continue? I hope MS & BAC finally wave good-bye as it is long overdue.

Fri, 09/30/2011 - 18:07 | 1727671 DormRoom
DormRoom's picture

be careful what you wish for.  Paulson Fund owns a lot of bank stock.. If the banking sector cave, he'll be force to liquidate GLD to cover, and bring down other hedge funds with him.

Fri, 09/30/2011 - 20:34 | 1727938 New_Meat
New_Meat's picture

gld down b buying opp

Sat, 10/01/2011 - 10:59 | 1728845 max2205
max2205's picture

DJIA is now a Govt controlled number. Think BLS or CPI

Sat, 10/01/2011 - 09:28 | 1728639 covert
covert's picture

keep cleaning out the excessive optimisim.



Fri, 09/30/2011 - 16:29 | 1727354 mayhem_korner
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CNBC searching for that Canadian she-porter for a little spin on this...

Fri, 09/30/2011 - 16:42 | 1727368 GeneMarchbanks
GeneMarchbanks's picture

CNBCialis as Peter Tchir so succinctly put it.

Fri, 09/30/2011 - 16:33 | 1727377 SheepDog-One
SheepDog-One's picture

The Canuck Breck Girl while lovely, would explain this by saying investors are nervous because they dont think equities are backed by anything? Then she'd go to her second gig, modeling shoes.

Fri, 09/30/2011 - 16:31 | 1727361 The Axe
The Axe's picture

Tyler,,,,Will OIL    Fall it broke 80   today on nice volume........charts (to me)  look like a retest of 60? 

Fri, 09/30/2011 - 16:35 | 1727384 junkyardjack
junkyardjack's picture

Deflationary spiral, Bitchez!

Fri, 09/30/2011 - 20:58 | 1727974 Spitzer
Spitzer's picture

Not so fast.... To make a long story short about treasuires, gold, the Dollar and the Euro,  visit my blog.



Fri, 09/30/2011 - 16:38 | 1727405 SheepDog-One
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I think theyd love nothing more than to see commodities shoot higher, but no one can pay for higher prices, so inflation remains basically impossible.

Fri, 09/30/2011 - 19:41 | 1727834 monkeyshine
monkeyshine's picture

"no one can pay for higher prices, so inflation remains basically impossible."

Interesting quote. I agree with the part here that I quoted.  Though in fact producers and manufacturers are paying higher prices, partially offset by lower labor costs (smaller workforces) and international money exchange.  Producers are afraid to raise prices in this economy. Even if commodity prices are up because of cheap money given to speculative institutions, the producers are eating those input costs.  If deflation comes, some producers will become predatory. 

It is a little baffling that despite all the overpriting and overspending we are still at risk of deflation. I have held that the US has been able to run these deficits and print excess monies in large part because the rest of the world is growing too. Dollars are being stashed all over the world and now with the Euro in flux the appetite for dollars may be larger than many thought.  The inflation people feared hasn't really materialized. The markets are up from 2008, but not much else is. 

Of course, the problem is money velocity.

At risk of lots of red arrows, I will say all this: I suggest PMs as well as other commodities could ease dramatically in the coming months.  Those long gold have been well rewarded, and may be well rewarded in the future. But between the past and that future may lay another buying opportunity - at least until QE3. And if there is QE3 it likely has to be so massive as to force those holding dollars to start spending and lending them.  Possibly as large as $3 trillion, or even higher.  To politically justify that kind of stimulus, markets have to plummet. If the FED had any brains, they would try to work it through congress in the form of "home loan adjustments" e.g. create a way for homeowners current on their mortgages to easily refinance  in the low 4% range. At 2x the 30 year Treasury rate, 4% offers more than enough incentive considering that most of those who can't pay have already defaulted. This kind if stimulus will put money into the pockets of the people you are talking about.  A $300,000 mortgagee will see his payments drop $250 a month  or more (from 5% to 4$), while a $1 million note (think, California, New York homeowners) will drop around $1300 a month going from 6% to 4%.  That's serious money to each respective cohort and everyone in between.  

I know many here will lambaste this comment as just repeating the same madness, not fixing the real problem, etc etc.  That may well be true. However, the system is the system is the system. It won't change itself. This is about as creative as it can get in the circumstance.  We can fix the root of the problems later.  Deflation will be an experience few living people have ever experienced and it will be very hard to get out of. Trickle down wont work. Massive injection of money at the bottom is what it will take, assuming we are going to experience deflation, which I would give odds on. 

Fri, 09/30/2011 - 22:25 | 1728098 Voodoo-economist
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good one

Sat, 10/01/2011 - 09:24 | 1728634 Bobbyrib
Bobbyrib's picture

The second half of your post will never happen. The government doesn't give a crap about people not worth millions/billions. I know Obama has suggested similiar plans in the past, but the Republicans will never let legislation like this pass. Banks would get screwed on perfectly good loans, while middle class homeowners would receive a bailout.

If you are purposing that the government make up for the lack of mortgage interest, the banks will be missing out on, the debt ceiling would have to be raised again and we all know how that went last time. It's not time for the US government to take on more debt.

If you have money deflation is not that bad. You pay less and if you don't save your entire discretionary income you would purchase more products for less money. I'm already spending whatever money I no longer have to put into my gas tank as gas declines in price. Also I suggest buying food cheap that will stay good for years so when hyperinflation eventually hits, you'll have your food before TSHTF.

Sat, 10/01/2011 - 14:07 | 1729183 Mr_Wonderful
Mr_Wonderful's picture

Yeah, inflation will remain elusive for years to come, given the weak labor market and declining wages. The public has finally in the last two years started scrambling to pay off debt and to save, all in anticipation of falling prices.


Fri, 09/30/2011 - 16:31 | 1727362 The Axe
The Axe's picture

Tyler,,,,Will OIL    Fall it broke 80   today on nice volume........charts (to me)  look like a retest of 60? 

Fri, 09/30/2011 - 16:33 | 1727364 LMAO
LMAO's picture

Right, I thought these EOM windows weren't properly dressed.

What now? Stampede into USD, crash equities and force the Bernank QE-inf.. hand?

Fri, 09/30/2011 - 16:44 | 1727436 disabledvet
disabledvet's picture

Had my bin's out and window dressers were hiding some SERIOUSLY cheap furniture. I don't know about you but I was SHOCKED!

Fri, 09/30/2011 - 17:22 | 1727552 fuu
fuu's picture

The drapes do not match the astroturf.

Sat, 10/01/2011 - 00:19 | 1728264 slewie the pi-rat
slewie the pi-rat's picture

how much for the troll in the window?

Sun, 10/02/2011 - 09:20 | 1730574 fuu
fuu's picture

If you have to ask...

Fri, 09/30/2011 - 16:31 | 1727366 junkyardjack
junkyardjack's picture

US remains the best performer, Yes We Can. Hopium is still in effect.  Once Occupy Wall St hits the rest of the country I'm pretty sure we'll manage to catch back down to the rest of the world

Fri, 09/30/2011 - 16:32 | 1727367 kengland
kengland's picture

Volume was pathetic today. When are the going to sell this thing in earnest!

Fri, 09/30/2011 - 16:35 | 1727389 SheepDog-One
SheepDog-One's picture

I dont know, but has to be sometime soon. Im not worried so much about an exact date, just getting the remote mountain cabin stocked as theres no doubt it IS coming.

Fri, 09/30/2011 - 17:31 | 1727583 Smiddywesson
Smiddywesson's picture

The fun begins on Monday as Q4 begins.  If they hope to let off some steam and then ramp things into the election, it has to be right friggin now.


Fri, 09/30/2011 - 18:20 | 1727696 Rainman
Rainman's picture

This market will get sold when the institutionals throw in the towel on QE3. The pension funds are celebrating a recovery summer....just before the 3rd quarter train hits them. Amusing.

Fri, 09/30/2011 - 18:54 | 1727753 kengland
kengland's picture

Agreed. Bernanke continues to speak to that effect as well.

Fri, 09/30/2011 - 16:32 | 1727369 kito
kito's picture


check out these gold derivatives by jp morgue

Fri, 09/30/2011 - 16:36 | 1727395 GeneMarchbanks
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'The leviathan JPM, uber bank of Rockefeller and Morgan, holds 80% of the gold derivatives in the world, with HSBC having the rest. HSBC was founded in the British colony of Hong Kong and is now headquartered at Canary Wharf London'

Great find, Jesse's been on the mark big time.

Fri, 09/30/2011 - 16:34 | 1727380 Belarus
Belarus's picture

Buffett's gobbliing up stocks like he was in the fall of '08, too. It's not 2008' it's exactly like 2008. Expect another 30% decline from here unless the Inkjets makes those HP printers start singing soon.

Fri, 09/30/2011 - 16:42 | 1727410 mynhair
mynhair's picture
  1. He's eating his own jiz.
Fri, 09/30/2011 - 16:34 | 1727381 kito
kito's picture

if big ben doesnt start printing you are going to see oil at 30.

Fri, 09/30/2011 - 16:36 | 1727391 junkyardjack
junkyardjack's picture

And gas will be...well right about where it is right now. Screw the consumer

Fri, 09/30/2011 - 17:56 | 1727648 cbxer55
cbxer55's picture

You want gas? I got gas!  ;-)

Five Alarm chili farts anyone?  :-0

Fri, 09/30/2011 - 16:40 | 1727414 mynhair
mynhair's picture

30?  Never again.  You can make margerin out of it.

Fri, 09/30/2011 - 16:43 | 1727432 SheepDog-One
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Theres always the specter of this escalating war in the mid east with Iran next on deck to be 'liberated'...and all it would take is 1 carrier sunk in the Hormuz Straits to send oil right back to $140 overnite. 

Fri, 09/30/2011 - 16:49 | 1727456 disabledvet
disabledvet's picture

Israeli's goin all in on South Jeruselum while the US Ambassador is attacked in Syria doing anything but Ambassador work. Let's here it for war people!

Fri, 09/30/2011 - 17:51 | 1727404 Frank N. Beans
Frank N. Beans's picture

this (today) is just end-of-the-month window dressing.

wait till October

Fri, 09/30/2011 - 18:41 | 1727730 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

I wonder how much of the last couple weeks' worth of action was Hedge Fund vs Hedge Fund. Think of it this way. You as d-bag successful HF is doing ok while cock-sucker is having double digit losses. You d-bag know that cock-sucker has to ramp at end of quarter if you want to live another day. D-bag does this, buys equities cock sucker owns back about two weeks ago. Ride it to the top as CS tries to survive. D-bag sells off (then shorts) over the last few days with profits and CS is now further underwater. Cock sucker has to liquidate in October. D-bag picks up the equities at bargain basement prices. 

Fri, 09/30/2011 - 16:46 | 1727443 SheepDog-One
SheepDog-One's picture

Gee I wonder why TSY's did so good...OH thats right, the FED is now buying them up by the boatload, betting that soon the New World Order plan will be a total success and free slave american labor will make their bonds good.

Its a bet I wouldnt take myself, but FED is 'all-in'.

Fri, 09/30/2011 - 16:47 | 1727446 monopoly
monopoly's picture

Just one thing to say here.

THANK YOU Zero Hedge!

Fri, 09/30/2011 - 16:47 | 1727450 buzzsaw99
buzzsaw99's picture

so then you are saying we should be buying emerging markets bitchez? [/straw snark]

Fri, 09/30/2011 - 16:50 | 1727459 css1971
css1971's picture

Cool. I've set some limits that look insanely optimistic at the moment, wonder if any will get tripped.


The 1930s put everything into perspective mind you.


Fri, 09/30/2011 - 17:03 | 1727471 mynhair
mynhair's picture

TZA @ 100?

Or are you buying?

Fri, 09/30/2011 - 16:54 | 1727470 Stoploss
Stoploss's picture

Put yer crash helmets on.. Solid close below the 200dma.

Fri, 09/30/2011 - 16:56 | 1727480 Tsar Pointless
Tsar Pointless's picture

For once on a Friday afternoon, I have to agree.

This ship is sunk.

The S&P will be lucky to stay above the 900s next week.

Fri, 09/30/2011 - 16:59 | 1727490 mynhair
mynhair's picture

Remember the PPT was refunded in the debt cop-out.  We bounce around 1100 for a while.

Fri, 09/30/2011 - 18:11 | 1727680 kengland
kengland's picture

Huh? It's been that way for over a month.

Fri, 09/30/2011 - 17:12 | 1727529 apu123
apu123's picture

I saw some guy on CNBC discussing the coming week's economic events, unemployment on Friday, manufacturing etc.  He was really setting the bar low, stating that jobs created should come out at 50000, but if it came out as low as zero it was not that big of a deal, only a negative print would be disappointing.  Same with manufacturing.  He then went on to say the troika would give Greece its next infusion of money.  It is very interesting how these guys keep setting the bar lower and lower on economic data.  You know the government is really cooking the jobs numbers right now to get an above expectations number.  I do agree with the guy on Greece getting its money, I think they will, even though I heard some Troika reps could not access certain Greek ministries to get information.

Fri, 09/30/2011 - 18:00 | 1727653 RSloane
RSloane's picture

This afternoon CNBC was saying that Q4 was going to start out bullish and that next week will see DJIA and S&P soaring. Soaring, I tell you!

Fri, 09/30/2011 - 17:40 | 1727611 Grand Supercycle
Grand Supercycle's picture

S&P500 updated chart at blog shows price converging towards apex.

It should drop out of triangle and resumption of downtrend.

Fri, 09/30/2011 - 17:56 | 1727645 d00daa
d00daa's picture

once again, WHERE THE FUCK IS IQ45??? still long dec es??? your calls are beginning to rival momofader and harry...

Fri, 09/30/2011 - 19:57 | 1727865 mynhair
mynhair's picture

Long TZA Oct 57 p's, here.

Fingers crossed.

Fri, 09/30/2011 - 21:28 | 1728019 SILVERGEDDON

The Federal Reserve is neither Federal nor a "Reserve". This private bank run by the "Bank of England" has been stripping the US of its assets since the days of Andrew Jackson.  If the $16,000,000,000,000.00 given away secretly, since 2007, to the member banks isn't reason enough to overhaul our entire government financial system then our country is doomed to financial failure. You won't read this in the mainstream media....but it may emerge in the coming elections. Read about this first ever audit of the Fed and understand why we are in such trouble.  Tuesday, September 27, 2011 First Ever GAO Audit Of The Federal Reserve

(You can click on the site and read the report).

The first ever GAO audit of the Federal Reserve was carried out in the past few months due to the Ron Paul, Alan Grayson Amendment to the Dodd-Frank bill, which passed last year. Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill (HR1207), so that a complete audit would not be carried out. Ben Bernanke, Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets. Nevertheless, the results of the first audit in the Federal Reserve nearly 100 year history were posted on Senator Sanderâs webpage earlier this morning.   (Summarized below)

What was revealed in the audit was startling:

$16,000,000,000,000.00 (TRILLION) had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the worldâs banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest.

Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs. To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is only $14.5 trillion.

The budget that is being debated so heavily in Congress and the Senate is only $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world. In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. 
That was a blatant lie considering the fact that Goldman Sachs alone received 814 billion dollars. As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks received hefty chunks of the $16 trillion. ****


When you have conservative Republican stalwarts like Jim DeMint(R-SC) and Ron Paul(R-TX) as well as self-identified Democratic socialists like Bernie Sanders all fighting against the Federal Reserve, you know that it is no longer an issue of Right versus Left. When you have every single member of the Republican Party in Congress and progressive Congressmen like Dennis Kucinich sponsoring a bill to audit the Federal Reserve, you realize that the Federal Reserve is an entity onto itself, which has no oversight and no accountability.


Americans should be swelled with anger and outrage at the abysmal state of affairs when an unelected group of bankers can create money out of thin air and give it out to megabanks and super-corporations like Halloween candy.


The list of institutions which received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows:

Citigroup: $2.5 trillion($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion* ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)






Fri, 09/30/2011 - 23:33 | 1728178 Grand Supercycle
Grand Supercycle's picture

Originally posted Feb 16, 2011 and my opinion has not changed.

“When DOW/S&P500 correction gathers momentum I expect:
UP ~ USD, various USDXXX currencies, VIX Index


Sat, 10/01/2011 - 14:27 | 1729215 Mr_Wonderful
Mr_Wonderful's picture

If you´re in the market, be especially alert on Tuesdays the 4th, 11th and 18th. For some reason big money likes October as major crash month, maybe it´s some ritual thing with them. Slaughtering season, harvesting? Also they seem to favor Tuesdays for these purposes.

There are now 12 million October put option contracts against the S&P 500, so expect very hectic and volatile market activity leading up to the 20th.

Sun, 10/02/2011 - 09:17 | 1730572 pineyard
pineyard's picture

I have been away for a time

But just want to say :


KEEP IT UP ..over there !

Do NOT follow this link or you will be banned from the site!