The 4th day in a row when US equities disconnected (rallied) from credit markets - will this reversion be different. NYSE volumes were dismal (near the year's lowest) which seemed the perfect recipe for some stock-ramping tom-foolery - apart, that is, for FaceBerg of course. Yesterday's futures action in sync with global risk-assets continued into the morning with Europe open but TSYs led markets lower in the US pre-open until the plethora of miserable macro data was enough to spur the bad-is-better brigade who bid stocks up into the US open and just beyond only to see Spain's downgrade drag the spirits of every Treasury, FX, credit, and commodity trader down. The flush into the European close was the lows of the day for stocks (and TSY yields) with the former accelerating back up to its highs of the day by the close and the latter leaking higher in yields and filling the divergence gap. However, IG and HY credit spreads were far less sanguine than US equities in the afternoon even though HYG swung from significantly cheap to its fair-value (and stocks) to considerably rich by the close. EURUSD managed to get back over 1.25 at the close which seemed to provide some comfort that everything wasn't crash landing and while the USD implicitly weakened into the close (to end unch from Friday), it did little to redeem commodities back from their European-close plungefest. Treasuries ended higher in yield marginally from Friday's close while ES managed +1.4% potentially on the back of window-dressing - even though heavy volume came as equities crossed the trendline support. VIX fell less than 1 vol and held above 21% while Facebook vols were skewed 65%/55% (Put/Call) and volumes 5 to 4 in favor of Puts as it closed -10% at its lows.
Stocks (blue) have diverged from the CDS markets once again (orange curves). HYG (green) did its best to support stocks today though (even as HY and IG flatlined this afternoon)...
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which leaves HYG notably rich to its fair-value and stocks...
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and stocks remain in a world of their own relative to commodities and FX markets (though Treasuries did sell-off modestly back to try and close the gap - in a small range)...
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leaving Silver and gold down from Friday's close, Oil unch and copper scrambling back up a little at the close...
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which is intriguing given the USD is ending the day UNCH from Friday's close.
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but Facebook saw heavier volume than the last few days and its biggest down day in a week...
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and even in S&P 500 e-mini futures today, we saw modest volumes but small average trade size in the rally (yellow bars in the orange oval at right - h/t @eminiwatch) and heavy volume and average trade size as we reached the day's highs and the up-trendline...
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Charts: Bloomberg
Bonus Chart: US financials post completely unsubstantiated ECB rumor from last Wednesday...JPM and Goldman both retraced almost the entire rally before today's surge and now BofA is up 8%...sustainable?
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