Commodities Crushed & Bonds Battered As Stocks & The Dollar Soar

It was a weird week in the markets as contradictory narratives flip-flopped from growth scares to inflation fears…

• Commodities crushed – recession anxiety, demand weaker? (but China reopening and stimulus)

• Bonds crushed – strong enough economy, inflation-fighting Fed hawkish

• Stocks strong – recession anxiety, end of Fed easing closer (Growth >> Value)

• Gold down hard – strong enough economy, inflation-fighting Fed hawkish

• Dollar up strong – strong enough economy relative to Europe (Fed ‘hawkisher’ than ECB)

• Payrolls headline strong BUT household survey ugly – so is the economy ‘strong enough’ or a shitshow?

The bottom line is that the market shifted hawkishly with rate-hike-expectations up 25bps (1 full hike) this week…

Source: Bloomberg

…with July fully pricing-in a 75bps hike and September now at around 27% odds of a 75bps hike…

Source: Bloomberg

Either way, stonks loved it – everyone dashed for the trash and Nasdaq led the charge higher on the week. The Dow was the worst performer with gains just under one percent…

The Nasdaq closed higher for the 5th straight day – its longest win streak since Nov 2021.

The S&P 500 closed just lower – breaking a 4-day win streak – and this is the 7th Payrolls day of the last 8 that has closed lower.

Thanks to a giant short-squeeze (‘Most Shorted’ stocks +15% from Tuesday’s opening lows to Friday’s highs) on this holiday-shortened week…

Source: Bloomberg

Cyclicals dominated off the opening Tuesday lows (with Tech and Discretionary leading) while Defensives ended the week around unch (Utes weakest)…

Source: Bloomberg

Energy stocks had an ugly week.

Growth dominated Value on the week (the best week since March)…

Source: Bloomberg

Value has fallen to its weakest relative to Growth in 2 months…

Source: Bloomberg

Bonds were dumped this week with the short-end hit hardest…

Source: Bloomberg

10Y Yield broke back above 3.00% this week (and we note that 30Y yield tagged down to the 3.00% yield level on Wednesday before taking off)…

Source: Bloomberg

The yield curve (2s10s) inverted once again…

Source: Bloomberg

The Bloomberg Dollar Index rose for the 5th week in the last 6 to end with its highest weekly close since the safe-haven spike in March 2020…

Source: Bloomberg

The DXY Dollar Index (more heavily weighted to EUR), soared to its highest weekly close since Oct 2002…

Source: Bloomberg

Cryptos had a big week with Ethereum leading the charge, up 15%…

Source: Bloomberg

Ethereum topped $1200 and Bitcoin rallied back up to $22,000…

Source: Bloomberg

Commodities were all lower on the week…

Source: Bloomberg

Gold closed well below $1800 for the week – but we note around the US equity to EU close period (highlighted each day) there has been considerable action (after the London Fix)

Oil fell for the 3rd week of the last 4 but WTI bounced back above $100 to close the week…

Well they were all lower apart from EU NatGas which exploded higher…

Source: Bloomberg

Finally, this week’s buy-gasm in stocks really should not come as a surprise – as we noted at the start of the week, this two week period starting July 1 is the ‘most bullish’ period of the year…

So enjoy it while it lasts…