NASDAAPL Explodes Most In 4 Months As Volatility Implodes

A 2.7% gain in the NASDAQ, obviously dramatically aided and abetted by the squeeze-fest in AAPL +9% from last night's close, was the best gain in over four months for the tech-heavy index but still leaves it lagging the Dow (by over 2%) and S&P 500 (by over 1.5%) from the 4/9 highs in Apple. At the other end of the spectrum in the real economy, CAT's less than rosy outlook, saw it suffer its largest drop in 7 months dragging an impressive 37pts out of the Dow's lagging but positive performance on the day (now positive from the 4/9 Apple Top day). Of course the Apple-exuberance which seemed enough for the entire world's risk-asset markets to decide that everything is fixed started the day off gap higher in the US and late-to-the-game retail pushed equities higher out of the date this morning as the rest of risk-assets were generally steady. Europe's close seemed to have only minimal impact as everyone was focused on the FOMC statement and Bernanke's presser. Between the FOMC and the Bernanke conference, Gold, stocks, and the USD knee-jerked and retraced but Treasuries remained worse (higher in yield by 3bps or so). Once Bernanke began his quaking tenor, Gold pushed higher, Treasuries lower, stocks higher and the USD lower as hints of QE back on the table were dribbled in between defensive tacks on biflationary concerns. This QE-specific action was accompanied by low volumes though (as usual) but volatility did compress (a la typical QE trades) with VIX closing below 17% - its lowest in over a month and near its largest divergence from European volatility (V2X). Commodities in general lagged early then recovered as USD sold off on QE chatter from Ben - Silver underperformed on the day but outperformed notably off its lows after testing below $30 for the first time in 3 months. Treasuries pulled back positively off their high yields of the day in the late afternoon ending the week with the short-end (out to 5Y) flat and 10s/30s 2.5bps higher in yield. HYG was a dramatic high-beta outperformer today - now green for the month - even as HY and IG credit lagged the ebullience in stocks (though did improve to two-week highs). ES (the S&P 500 e-mini future) closed above its 50DMA on average volume today with some heavy and larger average trade size into the close ending just above Friday's highs - even after the dismal US data (Durable Goods) and Europe's issues this morning.

The NASDAQ still lags the S&P 500 and the Dow post Apple's Top but did a lot of catching up today...

The pre-FOMC exuberance was generally only in stocks (blue - red oval) but between the FOMC statement and the Bernanke press conference equities, gold, and the USD round-tripped off initial knee-jerk responses (but Treasuries did not - staying higher in yield). Then once Ben started quivering and let the QE cat out of the bag a little, it was QE-on (after AAPL-on earlier in the day)...

VIX also followed the QE-on path and compressed to its lowest in over a month below 17% and dramatically dislocated from Europe's VIX equivalent...

But it was gold and silver that were rejuvenated by the QE chatter - recovering dramatically off their earlier knee-jerk lows. Interesting that Silver dropped notably before FOMC and gold today?

But it was high-beta high-yield bonds that were bid/squeezed today as they pushed notably higher (green below) into a gain for the month and remain the easy outperformers. IG and HY re-converged after some HY-IG decompression but stocks (blue) outperformed IG/HY on the day..

Which leaves HYG significantly rich not only to its own intrinsic value (dark red below) but stocks broadly and HY credit spreads in general. After SPY and HYG came back together (red oval) from early month rotation - perhaps this jump today is the final squeeze cover of those who put the earkly month short HYG, Long SPY trade on? Either way, HYG premia is getting high after reconnecting just two days ago...

 

Charts: Bloomberg