Friday was the most active day in ES (the e-mini S&P 500 futures contract) since 12/16 and today saw volume once again surge in the futures market as it tested 1300 for the first time since 7/28. However, NYSE stock volume (which managed a very late-day spurt on Friday) was dismal once again today (for instance -25% from Friday with 3 minutes to go) with once again an extremely late jump taking it back to 'normal' for the year so far (but still dramatically low compared to previous year 'norms'). Stocks rallied on China GDP and an optically decent Spanish auction but as we moved into the European close, risk started to leak off and accelerated in the afternoon as IMF headlines, LTRO rumors, and IIF/PSI chatter hit though more expansive ECB seemed to stall losses at last night's ES re-open levels. ES is down very marginally from Friday's late-day ramp close and credit outperformed today (though HYG hung in with stock's weakness) as financials underperformed. The majors were the worst performers with Citi and BofA giving decent amount of YTD gains back. EUR stabilized post-Europe (after selling off into their close) with the USD (DXY) down 0.4% from Friday and GBP underperforming. In the face of the USD stability this afternoon, commodities were mixed with Oil spiking back over $100 (as NatGas was crushed), Copper leaking off but holding gains 2%-plus gains from Friday (China), as Silver and Gold lost their earlier gains (3% and 1.5% at best) to end around 0.75-1% better from Friday's close (still a double on USD weakness). Treasuries closed marginally lower in yield from Friday (1bps max) but were 4-5bps lower in yield from around the European close (as 2s10s30s slid also). Stocks closed well below broad risk assets as FX carry never really joined the derisking craze and oil's strength seemed divergent for now.
[10]
Credit stayed better as stocks leaked off this afternoon though HYG held in on the derisking.
[11]
Financials underperformed today with XLF down 0.69%, Utilities second at -0.09%) and the rest of the sectors better on the day clustered around 0.25%-0.75% as Energy outperformed (even as NatGas was crushed). Most of the major financials (above) have compressed back to a narrow range of outperformance but BAC remains significantly outperforming (though well off its highs from last week). All but BAC now trade within the first day of the year's range.
[12]
FX markets were stable this afternoon (orange oval) after leaking lower through yesterday and this morning (lower for USD that is). GBP (cable)is the worst performer against the USD while SEK is best and JPY remains stable once again.
[13]
Credit and interest rate markets were decidedly more risk-on this morning than stocks (as seen in the upper left chart above) but TLT rapidly came back (rates fell) and credit reverted with VXX limping up (and VIX pulls up towards our credit implied expectation - lower left chart). The resyncing ofthe SPY-VXX-HYG-TLT foursome is notable when compared to the significant dislocation between stocks (ES) and broad risk asset drivers (CONTEXT [14]upper right chart) as correlations broke down rapidly in the sell off (lower right).
[15]
Gold remained above $1650, though off its best levels at a highest since 12/13 as it touched above its 50DMA and retreated (but held above its 200DMA). Oil is the only commodity of the more economically sensitive ones we track that ended at its best as Copper, Silver, and Gold all exhibited a similar pattern of rollover as the day wore on.
Following our earlier discussion of VIX [16], vol rose quite notably into the close and we specifically highlight the fact that implied correlation (the relative demand for index/macro vol/protection) is at its highest year-to-date over 79%.
Charts: Bloomberg and Capital Context [14]