Today was a non-POMO day; a day when the Federal Reserve did not actively inject a couple billion dollars into bank reserves. The last 7 POMO days have been wonderfully green for the cash equity session. Today, no POMO, no MOMO, no new highs. What was different? Europe was closed (so we didn;t get the ubiquitous surge post EU close), we had poor data (bad has been good for weeks now), bonds outperformed (equities haven't cared at all for weeks), and the USD weakness 'should' have been equity positive (if correlations held). But it didn't. Trannies were monkey-hammered with their second-biggest drop in almost six months but the S&P, Dow, and Nasdaq are clung together down around 1% (biggest drop in 2 weeks). FX markets were 'sporadic' with periods of silence punctuated by chaos (around the FOMC) - JPY's last 5 days now equal the biggest rally in two years as it tested up to 97 and pulled back. The worst first-day-of-the-month since June of last year for stocks seems to signify a Great Un-rotation as Treasuries were well bid (yields down 4-5bps to new 2013 lows).
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It seems pretty clear (especially with volume the last few days) that managers were hedging into the highs as opposed to chasing...
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Commodities were plundered early on (even though the USD was getting smoked) but bounced back after the European close (UK was open) and extended gains after the Fed...
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and FX markets reversed their USD plunge on this morning's data and then extended the reversal on the FOMC...
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and Treasury yields made new 2013 lows at 1.6120%...
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Energy, Materials, and Homebuilders were the high-beta laggards today. but the Transports were hammered relative to the rest of the market...
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In the last few minutes, copper collapsed to Lowest Since Oct. 2011...
Broadly speaking, risk assets led stocks lower all day, as Capital Context's CONTEXT model [14] shows below...
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Charts: Bloomberg and Capital Context
See What Happens...
The Big Lebowski _ This Is What Happens Larry [16] by hulu [17]