A rebound in prices paid in the Services sector surveys combined with hawkish comments from Boston Fed's Collins to send the dollar higher and stocks, bonds, bitcoin, and gold all lower. Oil prices bucked the trend.
Today's price action is consistent with the market dynamic we've seen play out over the past few months, characterized by elevated sensitivity to economic data, with equity markets seemingly adopting a 'bad news is good news' view, rallying on weak growth data, and selling off on strong data - amid fears that too strong data will increase the risk of an additional rate hike.
Rate-hike expectations jumped hawkishly higher after Collins told business leaders in Boston that:
"This phase of our policy cycle requires patience, and holistic data assessment, while we stay the course... And while we may be near, or even at, the peak for policy rates, further tightening could be warranted, depending on the incoming data."
With Nov odds of a hike jumping from 30% to around 45%m back up to where they were post-Powell Jackson-Hole speech...
Source: Bloomberg
'Soft' (survey) data soared to its strongest since Jan 2022 today while 'hard' data slumped to its weakest since May 2023...
Source: Bloomberg
So 'soft' survey data is showing price pressures rebounding and 'hard' data shows growth is slowing - smells like stagflation to us.
All of which weighed on stocks, dragging them all lower with Nasdaq the ugliest horse in today's glue factory (down around 1%), Small Caps were the least ugly but all majors indices are lower on the week (since Friday) with Russell 2000 hammered...
The S&P 500 closed back below its 50DMA (joining The Dow and Small Caps). Nasdaq found support at its 50DMA today...
The so-called 'Magnificent 7' stocks were slammed today - the biggest drop in a month (not helped by AAPL - hit by reports that China is banning iPhones from goct agencies; and pressure on the social media giants from EU regulatory designations)...
Source: Bloomberg
NVDA tumbled back to pre-earnings levels...
NVDA saw some modest 0-DTE call-buiying as it started to lose momentum but that was overhwlkemed by put-buying negative delataq flow into the bell...
0-DTE traders tried to fade the initial dump in AAPL too... then covered before a wave of 0-DTE put-buying sent the largest market cap companyt in the world dramatically lower...
Regional banks were dumped on the back of front-end yields rising (implying a lack of relief on the funding costs front)...
Treasuries were also dumped - especially at the shorter-end - helped by surging oil prices (2Y +7bps, 30Y unch)...
Source: Bloomberg
The yield curve (2s30s) flattened (inverted deeper), reversing all of the payrolls steepening...
Source: Bloomberg
The dollar extended recent gains - to its highest close since March...
Source: Bloomberg
Crypto was marginally lower on the day but Bitcoin saw some crazy (illiquid) moves intraday as it dived to run stops from last week's payroll drop then ran stops at $26,000 then dived back down again...
Source: Bloomberg
Oil prices bucked the broad risk-off trend, rising for the 9th straight session to close at 10-month highs with WTI topping $88...
Gold prices tumbled with Spot falling down to its 200DMA and finding support...
The relative outperformance of oil over gold has pushed the number of barrels of Saudi Crude per ounce of gold down to around 20... where next?
Source: Bloomberg
Finally, as Goldman's Brian Garrett noted this morning, it has been 91 days since the S&P 500 suffered a 1.5% loss or greater in a day...
That's unusual - it has happened only 5 times in the last 15 years. As we have discussed recently, Sep + Oct are seasonally-volatile months...
...and, at the same time, Goldman's index-trading desk highlights the "low-ness" of equity protection costs.
