Finance

Hawkish Fed Sparks Dow's Worst Streak Ever; Crypto, Crude, & Credit Crushed

Hawkish Fed Sparks Dow’s Worst Streak Ever; Crypto, Crude, & Credit Crushed

US equities are down 10 of the last 11 weeks – the first time since 1970.

But, The Dow has now had 11 down weeks out of the last 12. This has never happened before… (in Nov 1929, The Dow fell for 10 of 11 weeks)…

Which perhaps fits as US macro data is collapsing at an unprecedented pace (with UMich sentiment at record lows)…

Source: Bloomberg

Remember, there are 12 more rate-hikes priced in from here… good luck America.

The US equity markets suffered their worst week since the government locked down the US economy due to COVID in March 2020.

In fact, since the hotter-than-expected CPI print (and UMich) last Friday, Small Caps are down a stunning 10%, S&P and Nasdaq down 8% and the Dow down 7%

Energy stocks have been hammered since CPI last week (with this week’s losses the worst since March 2020) while Staples have held in as the prettiest horse in the glue factory…

Source: Bloomberg

And here’s some more context for this slump in stocks (courtesy of Saxo’s Peter Garnry)…

While the stock market is still higher since Nov 2020’s election date, the S&P 500 is now down since President Biden took office…

Source: Bloomberg

The equity put-call volume ratio has shifted up to its highest since April 2020…

Source: Bloomberg

Of particular note, given the rising put volumes, XLE (Energy SPDR) Put volumes literally exploded this week, to their highest since June 2008 – which happens to be right before WTI’s peak in July 2008 at $145)…

Source: Bloomberg

Also of note, Bloomberg’s SMART Money Flow Indicator has been surging higher into this selloff in stocks (are they primed for a big squeeze?)

Source: Bloomberg

Credit markets continued their collapse this week with HYG (HY Corporate Bond ETF) tumbling to its lowest level since The Fed started panic-buying HY debt in March 2020…

Source: Bloomberg

Treasury yields were up by a surprisingly uniform 5-7bps this week, but since last Friday’s CPI, the curve is notably flatter with 2Y up over 30bps and 30Y up around 10bps…

Source: Bloomberg

This smashed the yield curve (2s30s) down to cycle lows, briefly re-inverting once again…

Source: Bloomberg

The 10Y Yield stalled twice at around the 3.50% level this week

Source: Bloomberg

Japanese bond markets were making headlines this week as traders bet they could ‘Soros’ The BoJ’s yield curve control limit and bet on a break at this week’s BoJ meeting. For now they haven’t and the bets have eased offf but as the chart shows, futures are still trading well beyond the 25bps limit…

Source: Bloomberg

European bonds were also at the center of chaos as The ECB was forced to address ‘fragmentation’…

Source: Bloomberg

The dollar rallied on the week after finding support at pre-CPI lows…

Source: Bloomberg

Yen plunged by the most since March 2020 after trying to protect the yield curve…

Source: Bloomberg

Worst week for bitcoin (down 30%) since March 2020, but Ethereum was down worse, losing 35% this week alone!

Source: Bloomberg

Amid crises at several crypto lenders, Ethereum (which formed the backbone of some of the contracts involved in these transactions), has been monkeyhammered (down to $1050 at the lows) and has broken out to the downside relative to Bitcoin…

Source: Bloomberg

Also note that on a weekly basis, Bitcoin has never been this oversold…

Source: Bloomberg

Commodities are all lower on the week amid recession and monetary-policy-tightening fears. We again use the anchor pre-CPI to show the full extent of the fear with crude and copper clubbed like baby seals and PMs actually holding in around unchanged from those pre-CPI levels…

Source: Bloomberg

XOP – the oil & gas exploration ETF – tumbled into a bear market this week. It was the worst week for broad energy stocks since March 2020

Worst week for WTI since April (Biden SPR Release)

Worst week for wholesale gasoline since March 2020

Despite the tumble in crude and gasoline, the 3-2-1 crack spread remains very elevated – incentivizing refiners (if only they had the capacity) to produce as much ‘product’ as possible…

Source: Bloomberg

Finally, as we detailed previously, TINA is dead (in Europe and the US) as US Treasuries now offer an ‘alternative’. In fact, as the chart below shows, bonds are at their ‘cheapest’ relative to stocks since Feb 2011…

Source: Bloomberg

But, in the interest of being fair and balanced, we note that market breadth is about as bad as it has ever been – and historically has prompted a rebound…

Source: Bloomberg

Of course, there is one big difference between all of those examples and the current one… The Fed balance sheet is shrinking (agreed it also did that in 2018/19 before Powell panicked) and The Fed is hiking rates dramatically (far more aggressive that from 2016-2019) as financial conditions are tightening at their fastest pace since the Lehman collapse…

Source: Bloomberg

How much more pain is Powell willing to inflict?

Perhaps that is why our ‘adjusted’ Misery Index is at its worst level since Jimmy Carter was president…

Source: Bloomberg

Let’s Go BranDow?

Tyler Durden
Fri, 06/17/2022 – 16:01

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