As we noted earlier, volumes in equity (cash and futures) were dismal today and yet we managed to close at the highs of the day after gapping up to open last night, sliding into Europe's close (as they derisked broadly) only to limp above VWAP and close just under 1350 in ES (the e-mini S&P futures contract) - right around the level of the open at the day-session - though we note that while financials outperformed, the majors all lost considerable ground from the open. Credit (HY and IG) tracked pretty well all day with stocks (and we heard liquidity was even worse over there) but maintains its underperforming stance post-NFP (especially high-yield credit). EURUSD was the standout today though as it leaked all the way back from a positive morning to close unchanged from Friday - just under 1.32 and at its worst levels of the day. Among FX majors, AUD outperformed but JPY's push after the European close held FX carry swings in check and provided little fillip for ES. Treasuries rallied well off early morning high yields, bounced after the European close and then rallied into the day session close in the US (ignored by stocks) to end mixed with the short-end higher by 1-2bps and the long-end lower in yield by 1-2bps as the flattening dragged an earlier ebullient CONTEXT (broad risk asset proxy) back down to earth again. Oil dominated chatter as the halt gapped up ETFs only to slide back after it reopened though ending +1.9% from Friday and above $100.5 at the close. Gold tracked the USD almost perfectly (ending unch) while Silver outperformed its precious friend modestly and Copper underperformed.
[5]
Credit has rallied off Friday's opening lows (and is well synced with stocks from that point) but remains a notable underperformer from the NFP print gap up (left of chart). Stocks (blue) remain the clear outperformer for now on lower and lower volumes [6].
[7]
Major financials underperformed from their opening levels today.
Utilities underperformed and Industrials and Financials outperformed (making us suspect some US-EU financial decompression trades being laid out given our earlier comments). Interestingly the major banks in the US saw quite weak performances. BofA ended down 0.36% from where it opened in stock trading, MS opened nicely higher and did nothing but sell-off all day (off 2.5% from its open) and ended the day -0.5%, GS slid all the way from its gap up open to fill the gap (off 1% from its open highs), JPM outperformed, and Citi lost 2% from its open. Of course AAPL traded over $500, lost it during the middle of the day but then reaccelerated and is trading near its all-time highs again after-hours up at $503.70 (for now).
In FX, AUD held on to some gains but USD strength against EUR's slow bleed from 1.3285 peaks intraday moved most FX back close to unchanged. JPY's overnight weakness on a big macro miss was ignored as Europe got going and then came back into the close of the US day session as EURUSD closed under 1.32 practically unch.
[8]
With Treasuries mixed (after a relatively volatile day), FX flat, and commodities diverging, risk assets in general ended up reverting back to ES once again in this narrow post-NFP print range that ES has traded in. A longer-term CONTEXT [9]that tracked pre- and immediately post-NFP very well has shown the relative exuberance in CONTEXT at the sniff of a rally (perhaps as equity volumes are dead then Treasuries or FX are being more levered?) but again and again we have seen CONTEXT (risk asset proxy) pull back to some sense of reality from stocks (though we note that high-yield credit is once again suggesting market-neutrality is perhaps the more reasonable approach to a long-only book right now - i.e. hedge your beta - though we are very close to fair either way).
All-in-all - a blah day but the European financial (and now US financial) action is worrisome (given its supposed leadership) and the credit weakness needs to correct higher if we are to see decent new leg higher in stocks from here. The volatility in CONTEXT is interesting in that it has been able to support an extended run in stocks during the last week - if we see one of the major risk drivers start to lose ground (EURUSD, Treasury curve, Oil?) then we suspect we will see stocks happily track it back down in a hurry.
Charts: Bloomberg and Capital Context