What Carl giveth, Carl can taketh away. We have warned for a month that credit markets have been decompressing (amid saturation) even as stocks went only one way. The S&P has hit almost its LABIA-based Fed fair-value and VIX/VXV hit extreme complacency levels so we were primed for a fall so it's ironic that Icahn pricked the bubble (at least for one day). More ironic still was CNBC's dismissal of his warning "as he is not a market timer" - when they wait with baited breath for his next 'buy AAPL' tweet. Bill Dudley's economic bullishness (and hawkish policy talk) also weighed on stocks. Credit was weak from the start - even as equities broke to new records; Treasury yields slid all day (with a small bounce higher after Europe closed). The USD's early weakness retraced to unch by teh close - rallying from the US open (but EURJPY was a big driver of weakness in stocks). Commodities did not bounce - all flushed lower around the European close and never recovered as stockd dumped.
No Dear today... but close... (as the NASDAQ test up towards 4000 - managing 3999.47 - before tumbling in its high-beta way...
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Credit has been flashing warnings for a while that the game (in the short term at least) is up...
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But of course, today's drop in the context of the last month is hardly death for equities - though given our context of a never-falling market, it is a shock...
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Spot the difference - Icahn's honesty tanked EURJPY (carry) and thus stocks declined...
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FX markets were a roundabot with Europe selling the USD and US buying it...
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Treasuries were a one-way street lower in yield (with a bounce at the European close)
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Commodities rallied into the US open and European close then tumbled and flatlined all afternoon (even as USD rose and stocks slid)...
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VIX bounced notably back above 13%
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Charts: Bloomberg