It seems the words of Plosser and Williams are more powerful than the rumors of Hilsenrath for now. While the jury is still out for whether the 'Tepper Top' is in, today's equity sell-off (admittedly a mere 0.5%) appears to have stunned a few people back into the reality that stocks actually fall. Trannies were worst performers but broadly speaking this was the worst drop in 2 weeks (only 2nd down day in May) and it appears equity markets are beginning to play catch-down to the reality other risk asset classes have been warning about for a week or two. Homebuilders were the worst performers (as the data this morning was just horrible - US and Europe) and while Tech held us up for a little while, APPL's retest of its 50DMA saw sellers come back (and GOOG also lost ground from the open). Away from stocks, Treasuries closed -6bps (their best day in 5 weeks); credit continued to widen (weaken); VIX shifted higher still; shorts actually 'won' on the day (most-shorted -1% vs RUT -0.5%); and despite an early dip, the USD ended the day up another 0.25% (with AUD weakness the most obvious pain for carry traders).
The disconnect remains...
[5]
But Fed 'Dove' Williams appears to be trumping Tepper's Turbo market...
[6]
as stocks begin to catch down to VIX...
[7]
Credit remains unimpressed...
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and Bonds decided that economic weakness trumped any Taper discussion today...
[9]
Gold and silver ended relatively flat despite a big plunge early in the European day. Oil surged again back up to $95...
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Shorts managed to 'win' today (as we discussed earlier [11])...
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As early exuberance gave in and collapsed back to risk-reality into the close (based on Capital Context's CONTEXT model [13] proxy for cross-asset-class risk)...
[14]
Charts: Bloomberg and Capital Context