Stocks Stumble At Critical Level After Economic Data Crashes At Record Pace

Today was a bloodbath for economic data (and that is before tomorrow’s horrific continuation of jobless claims) with almost every item experiencing record collapses (from Empire Fed to Retail Sales to Homebuilder and Homebuyer Sentiment). In fact the last four weeks – despite analysts knowing it was all coming – has seen the fastest crash and most disappointing collapse in US Macro data ever…

Source: Bloomberg

And while The Fed keeps printing money to rescue the (INSERT YOUR CHOICE OF – stock market, junk bond market, banks, airlines, or ‘Average Joe’ Americans), it’s not working…

Source: Bloomberg

Or put another way…

The chart below illustrates why it is that the government must ensure that bear markets never happen. There is too much at stake to end the “casino economy” when people’s net worth is so crazily hitched to the stock market. Question is – at what cost?? pic.twitter.com/abaXPwFvBD

— David Rosenberg (@EconguyRosie) April 14, 2020

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But The Fed would never “manipulate” markets?

[youtube https://www.youtube.com/watch?v=mXmNpdYpfnk]

And even the big bounce in stocks stalled after The Dow managed to scramble back to a 50% retracement of the drop…

Source: Bloomberg

And Nasdaq was unable to hold on to its 50- and 200-DMA…

On the week, Small Caps are down almost 5% and Nasdaq up around 3%…

Sending Nasdaq to its highest since Oct 2000 against the Russell 2000…

Source: Bloomberg

TSLA surged again today – up 35% in the last 3 days (GS upgraded today)…

And FANG Stocks extended gains – almost back to their record highs…

Source: Bloomberg

Bank stocks were ugly for the 3rd day but Goldman was bid after an ugly open…

Source: Bloomberg

Value factor is getting slayed this week…

Source: Bloomberg

Cyclicals were dumped today…

Source: Bloomberg

HY Bonds were down again… despite The Fed put…

Source: Bloomberg

Treasury yields plunged today led by a huge drop in long-end yields (30Y -12bps, 2Y -1bp)…

Source: Bloomberg

10Y back below 70bps (biggest yield drop in almost a month)…

Source: Bloomberg

The yield curve flattened notably today…

Source: Bloomberg

Elsewhere in the world, Italian bonds blew out…

Source: Bloomberg

The dollar surged higher today (biggest jump in a month) after dropping for 5 of the last 6 days (NOTE that the dollar reversed lower as soon as the US cash equity market opened)…

Source: Bloomberg

Cryptos were rangebound today unable to hold modest intraday gains…

Source: Bloomberg

WTI closed below $20 today (but Brent was harder hit)…

This is the lowest close since Feb 2002…

Source: Bloomberg

The front-month spread compressed a little today but remains a signal of a massive glut…

Source: Bloomberg

As Gasoline demand crashes to a record low…

Source: Bloomberg

Gold futures were lower today (not entirely surprising given the big surge in the dollar) and compressed the premium to spot…

Source: Bloomberg

Finally, as Gerard Minack notes, the key to my medium term view is not what is happening now amidst the Covid-19 crisis. The key is that these arrangements remain in place in the recovery phase. The crucial difference is that I expect fiscal policy, backstopped by QE, will remain expansionary in the recovery phase, unlike in the post-GFC expansion when fiscal policy was typically tightening as QE programs were deployed.

I don’t expect many markets to price today the prospect of this seismic policy change…However, it may be that gold is now sniffing out this shift.

Source: Bloomberg

Through the past few years gold has behaved as a deflation hedge. The spot gold price was highly correlated to the value of negative yielding debt. That correlation is breaking down. Market alchemy may be transforming gold from a deflation hedge to an inflation hedge.

And as far as inflation is concerned… Avocado prices have never been more expensive at this time of year…

Source: Bloomberg