A better than expected ADP print (hot), started yields rising but the Treasury refunding announcement (more supply) really cracked the bond market (no - it was NOT the Fitch downgrade!)
Source: Bloomberg
10Y Yields soared to their highest since Nov 2022...
Source: Bloomberg
Treasuries overall were mixed with the short-end actually lower in yield by the close (2Y -2bps) after an initial spike and long-end higher in yield (30Y +7bps) but well off its worst levels. On the week, 2Y is basically unch while the long bond is +15bps...
Source: Bloomberg
The yield curve (2s30s) steepened (dis-inverted) further - back near mid-July highs...
Source: Bloomberg
US Sovereign risk was completely unmoved by the nothingburger of the Fitch downgrade...
Source: Bloomberg
Although we would note that overall US Credit Risk is higher under Biden than Trump despite the so-called "Trump Downgrade"...
Source: Bloomberg
Stocks were down across the board (yes they fell on the downgrade headline) but a combination of strong jobs and heavy debt issuance could become a problem as rates soar and long-duration stocks (Nasdaq) were spanked hardest. The Dow was the prettiest horse in today's glue-factory, down around 1%...
The S&P's 47-day streak of days without a 1% loss is over
The Nasdaq 100 is now at its weakest relative to the Russell 2000 in 2 months...
The 'most shorted' stocks saw their biggest drop since March...
Source: Bloomberg
Banks broke down to two week lows...
AMD weakness dragged chipmakers lower with NVDA spanked...
...is this the high?
Source: Bloomberg
The dollar continued to rally, now erasing over Fib 76.4% of the mid-July plunge...
Source: Bloomberg
With the DXY Dollar Index closing above its 50- and 100-DMAs...
Source: Bloomberg
Bitcoin pumped and dumped today, surging higher overnight after the US downgrade to top $30k, and then legging lower on headlines about DoJ mulling fraud charges for crypto exchange Binance...
Source: Bloomberg
Oil prices puked today after rising overnight on the biggest crude draw in history. WTI ended back below $80 - around one week lows - with all sorts of explanations for why we sold off (chatter about slumping gasoline demand, and expectations for draws over the entire month of July being realized). It could just be positioning...
Gold tumbled AGAIN, with futures back at $1970 - near one-month lows...
Finally, as Goldman notes, as we head into the generally quieter summer period for markets, investors are debating whether it is safest to assume renewed risk-on momentum over the coming weeks or prepare for more meaningful downside on a possible disappointment in the data given the extent of optimism currently priced...
Simply put, US cyclical equities look vulnerable given the extent of growth optimism currently priced.
