Stocks, Bonds, Oil & Gas Dump; Dollar & VIX Jump Ahead Of Fed
Stocks were choppier today than the recent utter destruction but still could not hold a bid. Overnight saw some strength with Nasdaq up almost 2% ahead of the European open… but that as good as it got as selling pressure hit and despite a small impulse higher at the European close, stocks headed to the lows of the day. Of course, with about 30 minutes to go, a panic bid revived hopes. The Nasdaq managed to close green, the rest not so much…
There was one group that was green today – MonkeyPox vaccine makers…
Notably, ahead of tomorrow’s FOMC statement and presser, VIX was bid back up over 30 again today (some VIX options expired too)…
Credit markets are cracking with both IG and HY spreads blowing out…
Since right before last Friday’s CPI, the short-end of the curve is up a stunning 63bps (and long-end up 26bps)…
2s30s inverted, falling to its most inverted since Nov 2006…
The 10Y yield surged above 3.45% to its highest since 2011…
European bonds were bloodbath again with fragmentation accelerating (peripheral bond spreads decoupling notably)…
The DXY dollar index rallied for the 5th straight day to fresh cycle highs back to Dec 2002…
Cryptos were hammered lower once again with Bitcoin breaking below $21k intraday, but finding some support…
Gold extended its losses (amid the stronger dollar), testing back down towards $1800…
US NatGas prices plunged today after Freeport reported that it will take 90 days to get at least a partial restart of its LNG export terminal in Texas. European NatGas prices surged (less supply from US exports) and US NatGas crashed back in line (on an oil barrel energy equivalent basis) to WTI prices…
Oil prices surged initially, with WTI back up near its highest since Putin invaded…
But then headlines of chatter from Washington unveiling a windfall profits tax on Big Oil seemed to take prices back down again ahead of tonight’s API inventory data…
Finally, the market is fully pricing in a 75bps hike tomorrow and 90% sure of another 75bps hike in July. September also shows a 35% chance of a 75bps hike and November an 88% chance of a 50bps hike!!
Add that to December’s expectation and we are looking at 12 more 25bp rate-hikes priced in by year-end… which would then be followed after March 2023 by 3 rate-cuts as The Fed tries to rescue the economy from recession…
And in case you think stocks have it all priced in…
But knowing this market, if The Fed hikes 100bps tomorrow (or 150bps… or 200bps) algos will rip stocks higher because that means recession and more imminent rate-cuts and QE.
Just raise by 200bp tomorrow and get the recession over with so we can go back to rate cuts and QE.
— Sven Henrich (@NorthmanTrader) June 14, 2022
But that rally – and easing of financial conditions – will merely enable The Fed to be as or more aggressive at its next meeting, hence the ratcheting down nature of financial conditions.
As Marc Lasry warned towards the end of the day in a Bloomberg interview: “you’ll have more selling, more pain” before the end of the year, adding that bottom will come after the summer.
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