US equities suffered their biggest drop in 2 months today, with the S&P 500 closing a glaring 30-point divergence with high-yield credit markets which also sold off dramatically. The S&P 500 broke (and closed) below its 50DMA (as did the Nasdaq, Dow Industrials, and Transports). Russell 2000 dropped to beyond 4-month lows (-4.4% in 2014). Early USD strength gave way as stocks started to leak lower and closed unchanged (+0.5% on the week) led by JPY and EUR strength. Treasury yields plunged 4-6bps on the day (led by the long-end) with 10Y testing the critical 2.50% handle once again. VIX broke above 16, its 4th biggest rise of the year. Gold rose as stocks lost ground but silver, oil and copper slipped lower. HY Credit spreads closed at 8 month wides. Investors also piled into safe-haven short-squeeze 'camera-on-a-stick'. Stocks closed not "off the lows."
This move had NOTHING to do with Fed's Fisher's comments at all... he has been saying the same thing (rightly) forever... if it was Evans then maybe.
Who could have seen this coming?
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apart from the Russell 2000
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Some credit color
@Convertbond [8] market never cleared. Dealers been calling around with "cleanup lists" last couple of days. Syndicate been bringing juicy names
— credit markets (@swaptions) September 25, 2014 [9]
From The July Russell 2000 highs, it is down 9% now.. and all but Trannies are now in the red also...
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Leaving stocks ugly on the day (Dow's 4th triple-digit move in a row)
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It appeared there were 3 triggers for todays' move but frankly the equity move was as much catch down after yesterday's 50% retrace dead-cat-bounce than anything else...
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And since FOMC, everything is now red...
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VIX surged back above 16...
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Treasury yields plunged (led by the long-end)
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FX markets saw early USD strength give way rapidly as JPY carry unwinds and EUR strength pushed the USD to unch on the day (still up on the week)...
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Gold rose as stocks lost ground but silver, oil and copper slipped lower...
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Across asset-classes...
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Charts: Bloomberg
Bonus Chart: Camera-on-a-Stock safe haven bid
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Bonus Bonus Chart: It appears the hot money trades are slowly being unwound... commodities, EM FX, HY credit, and now US equities...
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