Dollar Dumps, Stocks Jump As 'Bad News Is Good' Storms Back

Dismal data from ISM surveys brushed off because of Powell's promises, desperate China liquidity injections, and trade talk hope...

Despite RRR cuts, China's bank stocks went nowhere on the day, but CHINEXT (small tech) surged...

European markets were just as mixed with high beta Ital and Spain outperforming while the rest of EU's majors ended red...

 

From the dismal ISM Services print, stocks surged but bonds, the dollar, and gold limped lower...

"Bad news is Good news" Again!

US equities soared on the bad news but once President Trump announced his address tomorrow - which could be good news for the shutdown - stocks did not like it...Small Caps massively outperformed today, Dow was least best...

Small Caps are up 7 of the last 8 days

And all on the back of a massive short-squeeze... This is the biggest 2-day short-squeeze since the days after Brexit

Plunge Protection Team much?

The big banks continue to extend their big gains in 2019... with Citi leading (up over 7%!)

 

AAPL didn't rally with the market today...

 

Which helped push AMZN to the world's most valuable company...

 

Tech stocks ramped up to Jan 2nd highs but faded into the close...

 

Credit markets continued their huge squeeze higher with HYG surging back to its 200DMA...

 

IG and HY credit spreads have compressed notably, along with VIX...

 

Treasuries were mixed today but broadly speaking sold as the long-end outperformed and short-end saw yields up 3-4bps...

 

Which flattened the yield curve...

 

The Treasury curve now has two inversions...

 

The Dollar continued to get monkeyhammered lower (as The Fed backs away from its rate trajectory plans). The Bloomberg Dollar Index tumbled to its lowest since early October...

 

Ethereum was modestly lower from Friday with Litecoin outperforming...

 

There has been quite a notable divergence between Stocks, Bond Yields (30Y stalled at 3.00%), and The USD in the last few days...

 

Gold and WTI managed gains as silver and copper slid (despite USD weakness)...

 

WTI was unable to breach $50 (in the front-month) and gave back the Saudi production headline-driven gains...

 

Gold held on to gains against the dollar and yuan on the day...

 

Finally, we note that the market shifted more hawkishly today with only 9bps of cuts priced in for 2019 now...

And, we wonder, are we really back in the "bad news is good" environment? After stocks priced in all that endless growthiness and now that The Fed is pulling the rug from the dream of economic growth (why else would they be jawboning the end of the tightening cycle?), investors are buying a dip on dismal data?

Or did Powell's double-pivot reassure them the Powell Put's strike is actually higher than they had been calibrated to expect by his pre-Fed context?

Or is it as simple as Mnuchin calling in The PPT?