10Y Treasuries hit a 1.60% handle as yields fell without a bounce all day. Equities managed a post-European-close bounce (notably to VWAP and unable to break above it) off pre-FOMC levels but that faded rapidly into the close of the US day session as volume and average trade size picked up. VIX traded over 17% (up over 1.4vols on the day). Gold held up better than stocks - especially given the strength in the USD - and remains well above pre-FOMC levels (holding its bounce into the close). Of the major US equity indices, only the Dow remains green from pre-FOMC as CRAAPL sees its worse 3-day slide in 5 months dragging NDX down (and high-beta Russell dropping fast). MS and GS are down 4.2% from pre-FOMC levels now as Financials are the biggest losers (just trumping Energy and Industrials) from when Ben opened his book. Healthcare remains the clear winner. WTI dived into the EU close but recovered to close at $90 (-3% on the week) but in general risk-asset correlations with US equities are extremely high (with risk suggesting more downside to come).
Gold remains a solid winner post FOMC as stocks are now below those levels. The USD and Treasuries are tracking each other strongly...
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The Dow remains green from pre-FOMC but the rest of the indices are fading...
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Morgan Stanley and Goldman Sachs are suffering post FOMC...
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Interestingly, commodities bounce off the European close dive was sustained (as opposed to stocks fading)...
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Correlations across asset-classes are extremely high (lower right) and broad risk assets led stocks lower (upper right) from lunch onwards. ETFs held together (upper left) with some noise from VXX and HYG but that faded rapidly into the close. On a super-long-term basis, stocks remain significantly over-priced relative to risk-assets (though we do not use this to trade it remains a useful pre-ECB/Fed indication of status quo)...
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Bottom-line - this kind of flow suggests end of quarter rebalancing as the relative outperformance of stocks has been extraordinary. It certainly doe snot suggest a pre-amble to high beta chasing (as we dismissed last week) or a QEternity-inspired risk appetite into Q4...
Charts: Bloomberg and Capital Context [10]
Bonus Chart: How much further for equities? hhmmm, bonds say quite a way...
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Bonus Bonus Chart: AAPL's 3-day 5% slide is the largest in over 5 months...
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