Dismal Equity Volume Day As Gold And Treasuries Surge

UPDATE: AA beats (headlines - at first glance) though Adjusted EBITDA is half Q2 2011's) and is holding modest gains after-hours - though well of initial knee-jerk reaction highs. And AMD (-7% after-hours) just pre-announced cutting revenue from sequentially +3% to -11%!!

Despite the ubiquitous late-day surge to day-session highs in S&P 500 e-mini futures (ES), equities ended the day marginally lower - rejecting the late-Friday surge unreality (as VIX also snapped back up and went sideways at pre-Friday-surge levels all day). The narrowest range in two months for the day-session in stocks (with major financials underperforming and only the Healthcare sector green on the day) was the antithesis of the strength in Treasuries with 5Y at record-low yields and 10Y testing back to 1.50%. Gold also led the day - notably outperforming both the USD-implied weakness and stocks - though the two now-QE-sensitive assets converged into the close - leaving Treasuries in the dust. ES drifted lower all night through the European session and converged with broad risk asset's far less sanguine levels from Friday into the US day-session. CONTEXT and ES tracked each other very well all day long until the last 30 minutes or so when stocks pushed 4-5pts rich. Credit modestly outperformed equities on the day but this was more catch-up from Friday than a new leg up as markets were dismally quiet in both stocks and bonds today - much quieter than Thursday and Friday of last week with ES (day) closing below its 50DMA (despite the late-day grind). EURUSD roundtripped from opening strength to weakness and back to modest strength leaving USD -0.2% (and only AUD weaker against the USD on the day).

Gold outperformed all day but note the convergence pull between gold and stock into the close today - even as Treasury yields just kept dropping to that 1.50 handle...


Stocks recoupled with broad risk assets into the day-session close - shrugging off Friday';s late day exuberance - but the again into the close today they pushed to their own new reality...

The USD roundtripped from its modestly weaker open after jumping into the European open last night and then leaking back all day - providing some momentum for both stocks and commodities. USD ended the day -0.2% from Friday's close (interestingly with only AUD weaker against the USD among the majors)...


But stocks remain notably hopeful relative to Treasuries as they drift lower and lower in yield...


Alcoa reported better than expected earnings and is +1.4% After-Hours (but the reality is not so pretty):

  • Alcoa projects global aluminum supply deficit in 2012 and reaffirmed its forecast that global aluminum demand would grow 7 percent in 2012
  • AA aluminum products Q2 shipments: 1,305,000 vs 1,295,000 in Q1, and 1,268,000 in Q2 2011
  • AA Adjusted EBITDA Q2 2012: $517, half of $1,039 in Q2 2011.
  • AA Adjusted EBITDA margin plunges to 8.7%, from 10.4% in Q1, and 15.8% year ago
  • Q2 Positive free cash flow of $246 million
  • Cash from operations of $537 million



and AMD dismal pre-announcement (and -6% after-hours):

  • AMD, which is expected to announced earnings at 5pm on July 19, just dropped the preannouncement bomb, and cut revenues from +3% sequentially, to down 11%. It is still keeping gross profit margin in line with prior guidance.
  • AMD is also lowering operating expenses guidance by 8% than prior guidance of $605MM.
  • The lower preliminary revenue results are primarily due to business conditions that materialized late in the second quarter, specifically softer-than-expected channel sales in China and Europe as well as a weaker consumer buying environment impacting the company's Original Equipment Manufacturer (OEM) business.


Charts: Bloomberg