S&P 500 e-mini futures closed at their day-session lows, below yesterday's day-session lows, and heading for overnight lows rapidly - once again giving up some decent early gains amid much heavier volume into the close. Markets were a mess today. Risk-assets in general had the highest intra-correlation in a long-time - with FX, credit, rates, curves, and stocks moving in almost lockstep all day (up then down). Equities were smashed left, right, and center by comments from the Ira Sohn conference (as it seems people have given up reading hedge fund 13Fs) with Einhorn's comments in particular showing up just how fragile and thin the real liquidity picture is so many stocks. Silver plunged just after the European close (margin/collateral calls?) and dragged the rest of the commodity complex down with it as stocks basically turned on a dime after hitting yesterday's closing VWAP this morning. Treasury yields rose and plunged in the same pattern - ending the day marginally lower than overnight low yields at the long-end but marginally higher at the short-end (post FOMC minutes). Financials were the worst performer again, down around 1.5%, with the majors in particular now starting to catch up to credit market's long-held conviction on these names (with MS -10.5% YTD and BofA plunging today but still +27.8% YTD). Gold remained relatively stable getting a lift post-FOMC (along with silver as the inevitability of QE was clear - but an equity plunge necessary before it can occur). Credit markets are not done worrying yet - and that weighed on JPM (-2%) as IG9 pushed above 150bps offered for the first time this year and HYG (the high-yield bond ETF) collapsed along with HY credit spreads. Still doesn't feel capitulative as overnight nerves for Greece remain high.
HYG plummeted today, its biggest drop in over 2 months and nearing its 200DMA and to its lowest in 4 months 9amid its highest volume in 4 months!) - catching up to HY18's dismal performance as credit overall continues to lead stocks lower...
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HYG is seeing escalating volume, multiple sigma price drops, and multi-month low prices (there's a reason high-yield bonds are well high-yield...)...
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BUT note that HYG merely plummeted to catch up with SPY's recent deterioration - and is now massively cheap to intrinsics (real bond-based fair-value). What worries us now is that this will cause the PMs to start selling the HY bonds in the underlyng portfolio should we see redemptions and into an illiquid falling market...
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Silver dominated the moves in commodities today - with a post-Europe close plunge that recovered some in the afternoon as we suspect liquidations continue...
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Which is interesting as we note the Gold/Silver ratio is now back to unchanged YTD and sitting at what seems to be an important historical level...
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Financials continue to mean-revert to reality...
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Intraday, credit markets led stocks lower (mainly HYG and VXX driven - upper left chart below) but across broad risk-assets, CONTEXT [12] and ES were in almost perfect sync all day (right hand side charts) with correlation extremely high and systemic (lower right chart). VIX pushed higher again (as expected) and tracked with equity/credit implied fair for much of the afternoon (lower left chart)...
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Charts: Bloomberg and Capital Context [12]