If today is any indication of what to expect from the rest of 2019, then hold on to your hats.
Stocks were already on the backfoot after Monday's shocking Apple revenue guidance cut and the overnight volley of currency flash crashes, yet just as they were attempting to stage a modest rebound following news of Bristol-Myers massive $74 billion acquisition of Celgene and the best ADP payrolls report since February 2018, the hammer hit after the ISM reported a plunge in the December manufacturing ISM, which tumbled to 54.1, the lowest print since Nov 2016 and the biggest monthly drop since the financial crisis.
That was enough to crush any fledgling animal spirits and steamroll any BTFDers, and as fears of an imminent economic recession re-emerged, markets tumbled, with the Dow Jones promptly dropping as much as 650 points lower and after a modest attempt to rebound around noon, it resumed its slide to close at session lows, down 662 points, or 2.84%, with the S&P down 2.5%.
It wasn't just Apple, however, as poor guidance from Delta crushed the airlines, and sending the Airline sector on its biggest one day drop since 2016...
... while autos were hit by disappointing December auto sales, with Ford announcing that just like GM it too would stop reporting monthly auto sales suggesting that the worst is yet to come.
And speaking of economic fears, both of Bloomberg's two main Economic surprise indexes turned negative for the first time since Trump was elected, wiping out all economic optimism since the Trump election.
Apple, understandably, did not help, and tumbled 10% its biggest one day drop since 2013, wiping out $75 billion in market cap, roughly equivalent to the market cap of Lockheed Martin's or Caterpillar's market cap.
Apple's plunge was not contained, and went so far as to hit the stock of its 3rd largest shareholder, Berkshire, whose Class A stock tumbled 5%, its 2nd biggest drop since 2011.
While Apple was the biggest hit to the Dow, responsible for 100 points of the drop, it was a bad day overall, with just one Dow company - dividend-paying Verizon - in the green.
Apple's plunge predictably hit the Nasdaq the hardest, which fell 3.1%, even as some other sectors performed relatively well, with the banks, housing and small caps dropping just oveer 1%.
Much of the volatility in today's market could have been avoided if traders had only heeded the signs of the past few months: as Alec Young, managing director at FTSE Russell told Bloomberg, "the market is the wisdom of all investors -- it was discounting this type of news-flow with the sharp and violent sell-off we got in December. When it makes a big move, up or down, it’s telling you positive or negative things about future developments. The extreme move down was telling you we’d get this type of news-flow."
Of course, it's always easier to make such profoundly philosophical observations in retrospect.
But while much of the drama was confined to stocks, the true chaos was in rates, where shorts were crushed (recall "Sorry Jeff: The Treasury Short Squeeze Hasn't Even Begun Yet") and a furious buying spree repriced the entire curve sharply lower...
... and while the 10Y yield plunged from 2.62% as low as 2.54%, closing around 2.56%...
... the real fireworks were in the short end, where the 2-Year, 3-Year, and 5-Year yields all dropped below the effective Fed Funds rate.
Meanwhile, anticipated nothing short of armageddon, the market has now priced out any future rate hikes, and not only sees 7% odds of a March rate cut, but is now pricing in a full rate cut by April 2020, suggesting it is convinced the recession will hit some time in the next 12 months.
In a surprising twist, however, instead of seeing the usual flight to safety into the dollar, the greenback tumbled today sliding to the lowest level since early November.
Meanwhile, with risk assets broadly liquidated, it will come as no surprise that credit was hammered as spreads on both Investment Grade and High Yield continued to blow out wider.
With nothing else working, traders rediscovered a true flight to safety, namely gold and silver, both of which surged to the highest levels since June and gold is now knocking on $1300.
And with another dramatic nightmare session, where scarce liquidity and surging volatility left traders begging for dramamine in the history books, everyone is wondering just what asset class will flash crash in the liquidity vacuum just before 6pm ET....