Slow Day. S&P 500 e-mini futures, stumbled early on by some 'reality' from Merkel, recovered to the magical 1315 level that has seemed so important in the last few weeks. Broadly speaking risk-drivers were either weaker or went sideways in narrow ranges as Energy, Financials, and Discretionary high beta pulled stocks higher. From yesterday's equity day-session close, oil is unch, copper down modestly, Gold down more and Silver down the most as the USD limped very quietly lower on the day (interestingly divergent as AUD and GBP strength was enough to balance the EUR weakness). Treasuries went sideways to modestly higher in yields by 2-3bps. Stocks outperformed (once again) from around the European close - pulling notably away higher from CONTEXT-based broad risk perspective but, just as with the last few days, financial weakness into the close led the broad indices into a decent nose-dive back towards VWAP right into and beyond the bell (on heavy volume and larger average trade size). It's getting old. VIX fell less than 0.5 vols and surged up to nearly 20% at the close (as stocks dumped giving up almost half its day-session gains) as total day volume was weak, average trade size low, and intraday range the lowest in 2 months. HY and HYG underperformed stocks (we suspect as the LT convergence reduces the push into HYG) and we are seeing IG-HY decompression pick up a little.
The early Merkel moment (red oval) was fully recovered but it seems gold and treasuries more in sync on weakness than stocks and the USD as we pushed higher...
[4]
Stocks gave back some of their gains into the close but it was the major financials that appeared to be looking for the exits in a hurry (aside from JPM's outperformance)...
[5]
Dispersion in FX is probably the biggest story of the week as the dispersion between GBP (+0.33% this week) for example and EUR (-0.62% this week) in this chart as JPY contonues to strengthen on carry unwinds...
[6]
and Commodities generally lost ground from yesterday's day session close with Silver roundtripping on its high-beta exuberance (as Merkel spoke)...
[7]
in summary, stocks outperformed in a very standalone manner relative to credit and broad risk asset classes on the day. Correlations fell as equities rallied away from risk value and VIX remains notably below its credit/equity fair-value here. The divergence between risk and stocks started (once again) just around the European close and it appears few liked the idea of holding too much overnight as we rapidly tumbled into the day-session close.
[8]
Charts: Bloomberg and Capital Context
Bonus Chart: just for fun, ZNGA's momo-crushing plunge today (as the charismatic CEO shared his wisdom on value creation)...
[9]
Bonus Bonus Chart: The NYSE Composite index appears to have a big hang-up at the 7750 level - which just happens to be around the Lehman levels...
[10]