US equities were drifting quietly lower after a modest rise overnight fadsed through Asian anxiety and European political issues in Italy but all that changed once McCain said "no" and proposed a broader-scope, deficit-growing Syrian plan. Stocks instantly rushed higher to Russia "catastrophic consequences" levels from last week with Trannies and the NASDARK having their best day in a month. Commodity markets - most notably silver, copper, gold, and crude oil - were all sliding lower before McCain, and oddly accelerated lower in his news. Treasures also rallied into the morning and then sold off significantly after McCain's comments with 10Y now up 11bps on the week at high yields with 10Y closing at its highest yield in 25 months. The USD slipped lower as AUD smashed to its best 3-days in 21 months and EUR slid but that left the USD unchanged on the week (compared with S&P's +1.6%). Stocks gave up some gains into the close but ended with Healthcare and Discretionary almost unchanged from Kerry's 8/26 speech.
The 10Y Treasury Yield closed at its highest since late July 2011... and the front-end of the Treasury cirve underperformed with 5s30s flattening 6bps on the day (not exactly good for all those NIM-loving financial bets?)
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Stock indices remain below Kerry's 8/26 speech levels but are hovering at Russia's response levels for now...
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and while Eneryg was already there, it looks like healthcare (well we're gonna need more medical care for soldiers?) and discretionary (we're gonna need to buy more stuff to distract ourselves from war) are pressing up to unch from Kerry...
FX markets were relatively range-bound - aside from the step-function move on McCain's comments. AUD is the only thing 'trending' per se with its best 3 days in 21 months!!
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but commodities don't care, they just want to slide lower...
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The "McCain" Moment... though note the fact that crude oil and the 10Y never really broke direction until after Europe closed...
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Charts: Bloomberg
Bonus Chart: Stocks have along way to catch back up to the Fed's balance sheet... or did something change? Is there really a limit to what the Fed can achieve in multiple expansion?
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