It was all going to plan until that early angst from Egan-Jones Spain downgrade was increased by L-Pap's 'sky-is-falling' Greek exit plans comments. Treasuries had leaked higher in yield and recoupled with stocks (after the divergence yesterday) but the USD (driven by EUR deterioration) was pushing higher (diverging from its recent correlation). This was dragging commodities lower but gently as stocks (especially financials) continued their dead-cat impressions. Even Facebook showed signs that the deluge of reality was coming off its shoulders. By the European close, stocks had pulled unhealthily high relative to risk-assets in general (once again) and credit was lagging a little. The Spain downgrade news stalled the EUR which began to slide - as did Gold and Silver along with USD strength - but Treasuries kept on limping higher in yield and tracking stocks, Then in the last hour of the day the L-Pap headlines - along with an increasing sense of deceleration (we saw heavy volume come in just after the European close - suggesting covering of the heavy volume up from the bounce lows yesterday) - and all the momo names started to lag with AAPL losing steam (more schadenfreude there after our comments yesterday) and then financials stumbled off their exuberant highs (though JPM managed a very good gain of over 4.5% still - as IG9 compressed for the first time in a few weeks). S&P 500 e-mini futures (ES) managed only a small loss but all the positive momentum was lost and large average trade size pressure came in at the close as it tried to get up to VWAP. VIX gained 0.5vols to close back above 22.5% and the term structure bear-steepened a little more. Yesterday's credit-led strength faded today, as skews normalized, with HYG losses and a renewed fear of the ETFs and indices leaking into the real bond market soon once again. Clusterbook is trading $30.80 after-hours with over 101mm shares traded!
Stocks (blue) and Treasuries (red) recouple today - sliding together at the close. USD strength (green) and Gold weakness was notably divergent from early Monday's tight correlations...
[9]
Stocks played catch up to credit (upper left) and broad risk assets (CONTEXT [10]upper right) this afternoon as their exuberance once again got the better of them. Correlations dropped (lower right) but VIX pushed up to its equity/credit fair-value by the close (lower left)...
[11]
Facebook dominated headlines and fell to an after-hours and all time (all 2.7 days of it) low of $30.79 after trying and failing to regain the lows of yesterday...more exits (and more lawsuits)....
[12]
Gold and Silver recoupled briefly this morning but then silver's higher beta nature took over as the USD surged this afternoon. Oil and Copper remained joined at the hip but slid on the USD strength also...
[13]
The USD is up 0.65% on the week - so Gold and Silver are likely suffering collateral/liquidation issues on top of currency translation - but the message today (as seen above in CONTEXT) was much more about carry-trades being lifted as AUD and EUR (relative to the JPY) were unwound notably - especially at the close in the bigger higher volume selloff...(higher on the chart is USD strength)...
[14]
Charts: Bloomberg and Capital Context [10]