The NYSE volume today was abysmal. According to BBG data, this was the lowest volume day in over a decade and even compared to other July 1st (or holiday weeks) this was the lowest volume print. Average trade size for the S&P 500 e-mini futures was also very small - almost the lowest of the year as low volumes and the narrowest high-to-low range for ES in over two months still managed to hold on to small gains for the day. In the face of this relative exuberance, Treasury yields dumped down 5 to 6 bps across the board remaining the most cognitively dissonant of risk assets on the day. HYG underperformed (as HY and IG credit indices were very quiet and reracked along with ES for most of the day). HYG did end Friday notably rich to intrinsics so this makes some sense but is unusual for a positive close in ES (as we note that 16 of the 24 times in the last year that HYG has closed red and SPY closed green, SPY has gone on to lose more in the next few days). EURUSD lost quite a bit of ground (again seemingly ignored by US equities) as USD rise 0.35% from Friday's close (albeit with AUD rallying modestly along with JPY). Oil retraced almst 50% of its spike gains from Friday but then pushed back up over $83.50 into the close and while Silver and Gold flatlined ending practically unchanged, Copper also lost a little ground (2x beta of USD) on growth slowing from China's data we assume.As with pretty much any rally, financials, energy and tech were the higher-beta winners all gathered perfectly correlated around 0.6% gains on the day (but we note that JPM and Citi remain negative from Friday's opening print). VIX ended the day below 17% (down a measly 0.25 vols) - its lowest close in two months - and while implied correlation managed to make modest gains (to around 65%) risk assets in general were only moderately correlated as equities outshone CONTEXT on the day.
The black dotted line is the decade long average NYSE trading volume for each day and orange is this year's volume - as can be seen it is well below average and well below the worst also (red line)...
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S&P 500 e-mini futures basically dumped on heavy volume around the ISM print and then leaked back to pre-ISM levels by the close (and back above VWAP) as we assume the bad-is-good crowd are back in town - though it is clear that particpation was very limited...
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Treasury yields fell notably early on and only recovered modestly as stocks and gold seemed to support one another most of the day in a world of their own...
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A last minute scramble for HYG exposure (where notably HYG and JNK had high volume days today) lifted it up to around where SPY was trading after it leaked off all day in the arb trade (since it is still notably rich to its underlying index names - lower pane)...
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This leaves stocks once again a little expensive relative to HY credit (based on our simple model) after they reconverged a week or so ago. Friday's notable equity outperformance and today's divergence have increased the divergence between the two markets quite notably (which suggests if you are bullish Buy HYG, if Bearish sell SPY for better value)...
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Broadly speaking, stocks outperformed risk assets proxied by CONTEXT (as Oil and Treasuries dragged risk off more than carry helped) - but correlation picked up into the last few hours...
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Charts: Bloomberg and Capital Context