Three days after posting its biggest single-day loss in seven months, it makes perfect sense in this nonsensical market for the S&P 500 e-mini futures to post their best gain in six months (a 4-sigma drop to a 3-sigma gain). Volume was heavy (and we note came in size at the end). Financials went berserk with MS and BofA ripping around 8% higher along with Energy and Industrials all up near 3% today. The biggest jumps was pre-European close, but the very late day surge which just seemed ridonculous (and did disconnect stocks from other asset classes) dragged everything to close at the highs (with ES +2.25% and Dow +280pts). Just remind us why again? No meat from Draghi, but more pavlovian-bell-based hope for tomorrow's Bernanke speech? If that's the case, then why did the Beige Book's much-more positive tone than expected drive gold (QE-hope-fading) significantly lower and leave stocks and treasury yields, at their highs and the USD at its lows. Bonds are 18-22bps higher in yield this week now (with 5Y outperforming only 10bps wider as maybe the 5Y is now the new cash). Gold underperformed its commodity peers as Silver outperformed and Oil and Copper leaked higher with the weaker USD (now down 0.74% on the week). IG and HY credit underperformed as stocks (and HYG) took off into the close and CONTEXT (a proxy for broad risk assets) disconnected lower from equity's ebullience at the end of the day after being dragged higher for much of the day.
S&P 500 e-mini futures saw a swing from a 4-sigma loss to a 3-sigma gain in the last 3 days...
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The major financials were the stand-outs - especially the totally 'safe' MS and BofA now (have you seen the discount to tangible book? </sarc>)...
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Equities (and HYG) surged into the close leaving investment grade and high yield credit spread markets in the dust...
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leaving HYG its most expensive relative to fair-value (lower pane) in two weeks (orange arrow) and SPY its most expensive relative to HYG since the end of April...
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and compared to broad risk assets, equities also disconnected into the close...
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but it was gold that gave up the QE3-hope first as bonds and the USD dragged along by stocks' supremacy ended at their highs (low for USD)...
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Around the European close today and the US close, very heavy volume and much-larger-than-average trade size (lower pane) flushes came in as we filled the gap to the day-session close from pre-NFP last week and then into the highs of that day at the close of today...
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Charts: Bloomberg and Capital Context [13]