While the EURUSD's recovery post Europe's close seemed to modestly support stocks, the USD is still up from Friday's close as ES (the e-mini S&P 500 futures contract) closes marginally in the green against the direction of FX carry, Treasuries, commodities broadly, and credit. The volumeless (and gravitationally unchallenged) push from post-Europe dip lows this afternoon were generally ignored by VIX, investment grade, and high-yield credit markets, after the morning was a relatively significant amount of selling pressure in HYG (the increasingly significant high-yield bond ETF) to pre-NFP levels only be bough all the way back and some more into the close. Average trade size and deltas had a decidedly negative feel on every algo-driven push higher from VWAP to unchanged but the divergence between Brent and WTI dragged the Energy sector over 1% higher (as every other sector lost ground with Financials (ex TBTFs) and Materials underperforming. Treasuries rallied well from the Europe close and closed just off low yields of the day as commodities all ended lower from Friday's close with Copper and WTI underperforming and Silver just edging Gold as they hovered around USD's beta for the day. VIX dropped modestly after the cash close but ended higher on the day with a notably low volatility of vol from mid-morning onwards (and the late-day vol compression seemed index-driven as implied correlation also fell commensurately). A quiet day in European sovereign and financials along with the disastrously low volume day in ES and on the NYSE really don't feel like signs of broad participation as Greek events slowly but surely unfold along the path of known resistance.
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The red oval shows the significant drop in HYG and the orange oval shows the underperformance of the major credit indices this afternoon. This latter is notable as we have tended to see them move in lockstep with stocks on low volumes as dealers simply rerack (shift their bid-offer runs) to meet equity/vol implied higher frequency moves. This suggests some net protection buying pressure away from the norm.
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Financials and Materials underperformed as Energy names took the lead (on Brent and obviously not WTI as tensions mount). While XLF did underperform, we note the Too-Big-To-Fails remained bid, especially BofA which just kept gliding upwards - all up around 1% today (we suspect maintaining some bid under stocks broadly as pivot securities or just the most hated outpeerforming once again).
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To get a sense of the disconnect from other risk assets, the chart above shows the market's CONTEXT from last Thursday (not recalibrated). The NFP jump left risk assets over-compensating for their underperformance going in but puling back into the US close on Friday. As ES opened on Sunday (with EUR down), so it slipped lower until coming back into convergence with the CONTEXT of the prior week. As Treasuries rallied, commodities muddled along, and FX carry rolled modestly over along with credit, so CONTEXT became notably uncorrelated into the afternoon today (and warrants normal recalibration) but just gives an impression of an equity market adrift on iots own bliss.
Around the close, we note that Treasuries sold off a little more though held gains for the day.
Charts: Bloomberg and Capital Context [12]