Its Over, page-15076

  1. 19,990 Posts.
    lightbulb Created with Sketch. 1943
    Overnight, Wall St faced a tech wreck as the mega techs Microsoft and Alphabet disappoints, the former fell -7.72% and the latter -9.6%. And in after hours, Meta (Facebook) had a mixed results with revenues surprising slightly ahead of estimates (despite concerns over advertising plunge) but EPS underwhelmed rather bad $1.64 vs $1.89 est on EPS and the stock is currently plunging -14% after hours. Amazon -4.1%, NVIDIA -5.59%, Apple -1.96%. Despite tech weakness and Nasdaq tumbling -2.04%, the S&P500 lost just -0.74% and stayed above 3800 at 3830 and that was even after posting an intraday high of 3886.

    Materials fared well, commodities were buoyed across the board thanks to a lower US dollar besieged by BoJ intervention and lower rates ahead narratives. Crude was up +3.34% to $88 , XLE +1.36% while Gold up to $1660+ level and GDX and GDXJ gained +2.95% and +3.05% respectively.

    US 10 year yield backtracked to just above 4pc and DXY sitting just under $110 at an important support level. So is the King Dollar's reign over? If it is, we should expect the DXY not to stop at $109+, it should go down far quicker and likewise with the 10 yr yield. Or could it be just a pause because the BoJ is fighting the Fed and throwing a lot of good money trying to support the Yen without raising rates, something which they are unlikely to win. Why is the BoJ doing so much to intervene to support the Yen? The Yen is dropping like a stone because Japan refuses to raise rates. Perhaps refuse is a little kind, they can't have rates going up, that would place the bond market in jeopardy (which the BoJ pretty much owns most of it). Sakakibara (Mr Yen) believes Yen still going lower to 170 and a hike in rates is inevitable. Secondly, currency traders in an overcrowded dollar long position have reasons to worry about continued BoJ intervention and market narratives about peak Fed rates ahead. But I won't get too excited about the end of the dollar rally - until we hear what Powell says on Nov 2 FOMC, we get to understand where US inflation is at on Nov 10 and until we see the end of winter in Europe and the ongoing Credit Suisse situation. The US dollar today remains the safe haven for money flows, just remember that. It is a little ironic that Gold investors , for the time being, need to hope for a more optimistic outcomes materialising ahead -e.g lower inflation, Fed pivot , rising stock prices to see better days ahead. Is that why we bought Gold?

    One final word on Meta(Facebook) - told you even once the best of companies can lose their way, Meta is a classic example , maybe Zuckerberg can be victorious one day with his Metaverse dream but no one is buying that now.
    Meta is trading after hours at $111, and that is a break below two key supports on the All view chart, and cements a 70% collapse from its peak and represents a loss of all gains any long term investor would have had since 2016.

    All view
    META Stock Price and Chart — NASDAQ:META — TradingView

    With more tech implosions, the S&P500 has lost a key sector that has delivered most of its gains in the past.

    But gambling money must surely go somewhere else right? Not wrong but they don't make up as much weight on the key indices and so they need to rise even more to bring material gains for the indices.

    ---------------

    A surprisingly violent day across markets today. FX saw Yuan explode higher; yields plunged everywhere; stocks pumped and dumped (with tech wrecked by MSFT and GOOGL); crypto spiked dramatically higher; oil and gold ramped as the dumped...

    Former NYFed President Bill Dudley unleashed another of his infamous op-eds today, calling for The Fed to be hawkish for longer (but not higher)...



    "Emphasizing “longer” rather than “higher” has some advantages. It presumably reduces the risk of a hard landing: If monetary policy is somewhat tight, but not very tight, activity and employment should slow gradually. It gives Fed officials time to assess the consequences of their efforts, recognizing that monetary policy entails uncertainty and affects the economy with long and variable lags.
    That said, the downside risks are significant. Because less-aggressive tightening takes longer to bring down inflation, it might allow inflationary expectations to become unanchored – a dynamic that only even-higher interest rates could counteract.
    ...

    Volcker did what was necessary and beat inflation. Burns didn’t, and failed. How does Powell want to be remembered?"
    So that really doesn't help does it!
    But, rate-hike odds slipped (Nov is still a lock for 75bps but Dec now only 25% odds of 75bps hike, down from around 75% on 10/20)...

    Source: Bloomberg
    And overall the terminal rate expectation slipped while subsequent rate-cut expectations fell (hawkish)- more pause than pivot...

    Source: Bloomberg
    US Majors pumped and dumped today, with MSFT/GOOGL weighing most heavily on Nasdaq overnight. The US cash open sparked another buying panic but the European close ended that fun and games (Nasdaq did not make it back to unch), By the close, the majors were all back the lows of the day with only Small Caps holding any gains...

    Boeing crashed after some early gains, dragging down the Dow also...

    The S&P 500 broke back above its 50DMA (following The Dow and Small Caps) but was unable to hold those gains. Nasdaq remains below its 50DMA...

    Just a reminder, stocks are decoupling from Fed terminal rate expectations on hopes of a pause... but haven't priced in the actual hikes to the pause (and the pivot is evaporating)...

    Source: Bloomberg
    Treasuries were bid across the curve with the long-end outperforming (30Y -9bps, 2Y -5bps). On the week, 2Y yields are down around 4bps (underperforming the rest of the curve), while 10Y is leading the charge, down around 20bps..

    Source: Bloomberg
    10Y Yields tumbled back below 4.00% for the first time in a week (10Y yields are down 35bps from Friday's highs)...

    Source: Bloomberg
    Here's Academy Securities' Peter Tchir explaining why the market is suddenly so bullish on rates:
    There are several reasons, the simplest being the Fed Blackout period. That is important for several reasons:
    • Fed members, such as Daly, in the moments before the blackout period started, seemed to shift gears in terms of what the Fed would do after November.
    • The alleged Fed mouthpiece, Nick at the WSJ, posted a note that also seemed to support that view.
    • So the last few things before the quiet period passed as dovish (at least by recent standards).
    • Finally, we are not subject to hearing how weak data isn’t changing their trajectory three times after any weak data hits (and weak data is hitting).
    The Fed messaging and blackout period helps but isn’t sufficient. Fortunately, if you are bullish rates here, there are other influences that will help support rates:
    • Lots of signs that inflation is abating (tomorrow’s Inflation Dumpster Dive T-Report).
    • Earnings calls seem to reflect caution, which can be self-fulfilling.
    • FX and geopolitics. It is clear that at least Japan and the U.K. have been reaching out directly and through back channels for support. It seems impossible that the ECB hasn’t. So there is pressure on the Treasury and the Fed to throttle back the dollar’s strength. Since we need cooperation for Russia and China, there could be some give or take.
    • China is un-investible. Expect U.S. investors to pull back from China, with U.S. asset prices likely to benefit.
    • Post-election policy shifts. I think there are two shifts that are plausible, regardless of who wins the November mid-terms:
      • Peace in Ukraine? Virtually no effort has been made to figure out an exit ramp for Putin even as his nuclear threats escalate, backed up by increasingly devastating attacks on infrastructure. Maybe, just maybe after the elections, the messaging will suddenly shift from ensuring a Ukrainian “win” to some sort of “global” win.
      • Inflation fighting at all costs? Given signs the economy is slowing, will politicians stick to the inflation is the devil policy stance? Would that allow the Fed to wait and see? It isn’t a pivot when their work is almost done.
    The yield curve flattened further with the all-important 3m10Y finally inverting...

    Source: Bloomberg
    The dollar was clubbed like a baby seal, tumbling to 5-week lows today (anyone else smell coordination?)...

    Source: Bloomberg
    As JPY rallied back to recent yentervention highs...

    Source: Bloomberg
    And Offshore Yuan soared by the most on record...

    Source: Bloomberg
    The dollar's weakness inspired some crypto gains with Bitcoin back above $21,000 (six-week highs)...

    Source: Bloomberg
    And gold rallied with futures back above $1675...

    Oil prices extended gains today with WTI back above $88 (2 weeks higher)...

    Finally, amid all the chaos, here's two charts that should help to do anything but calm the nerves. The Sovereign risk of USA and China has been soaring in recent weeks...


    Source: Bloomberg
    Default - unlikely; Devaluation - you decide?
 
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.