Equity markets were very much in a land of their own relative to broad risk asset classes all day until the FT's Harding "mo' Taper" memo hit and slammed reality back into the herding masses. Still convinced that the Fed will 'only' taper if the data confirms it, we suspect the broad market is missing the signals from broken markets and frothy levels that mean the Fed will use the modest improvements as a crutch upon which to jawbone tapering into our minds. Today's price action was - in the words of the great Bob Pisani, "just silly." A ramp out of the gate following Japan's lead which followed a Hilsenrath-inspired ramp-job from Friday combined with a beat for NAHB (and Empire Fed) sent all the high-beta into overdrive (builders +2.2%) - but nothing else was really moving (FX was relatively flat, bonds went sideways, commodities wriggled in a small range). The Harding hit and we gave back all the post-Hilsenrath gains, 330-ramped to VWAP and held it magically into the close (though the USD ended at its lows of the day, bond yields at their highs, and credit markets at their lows).
US equities levitated all day relative to risk assets in general (as proxied by Capital Context's CONTEXT model [11]). The moment Harding's headlines hit, that exuberance disappeared and equities reverted perfectly (and somewhat stunningly) - giving us a very clear measure of just how much hope was priced in (for now)...
[12]
and the S&P 500 ended up perfectly at VWAP after Robin Harding talked us back off the ledge...
[13]
and while stocks limped back up to that VWAP level, credit and rates both fell to the lows of the day...
[14]
and so did the USD...
[15]
It wasn't all silver linings and unicorn farts though - Trannies had a tough day early on...
[16]
The S&P 500, Dow, and Nasdaq all closed almost perfectly unchanged to the opening print of this morning's day session. The Dow Transports -0.7%
and from the open, Healthcare and Utilities underperformed as Energy and Homebuilders outperformed...
[17]
Charts: Bloomberg and Capital Context