Dollar Dives Amid Crypto Chaos As Biden Unveils Big-Spending Bill

The day started off ugly with a big disappointment for GDP growth and ECB’s Lagarde failing to jawbone the market down from its more-hawkish positioning on EU rates, but since when has actual fundamental economic data had anything to do with the stonk markets which ripped higher at the cash open. The fact that the Biden stimmy plan was shrinking by the minute also did not seem to worry stocks…

All the majors were higher on the day led by Small Caps outperforming Nasdaq and The Dow lagged (but still ended significantly higher). The buying accelerated in the last few minutes of the day…

Small Caps exploded higher at the cash open (best day since August), retracing much of yesterday’s plunge…

Cyclicals outperformed Defensives today (thanks to another buying panic at the open)…

Source: Bloomberg

With “Most Shorted” stocks squeezed back into the green for the week after two painful days…

Source: Bloomberg

Yields were very mixed on the day with the 2Y and 30Y unch while the belly lagged. 5s30s now down 10bps on the week..

Source: Bloomberg

The US yield curve inverted for the first time at the long-end of the curve (20s30s) as the echoes of policy errors grow stronger.

Source: Bloomberg

The dollar dumped to its weakest in six weeks, breaking out of its recent channel…

Source: Bloomberg

Bitcoin ripped higher on the day as the dollar dived, then flash-crashed, only to recover all the spike losses and more…

Source: Bloomberg

BITO, the shiny new bitcoin futures ETF followed suit…

Notably, Ethereum was far better behaved, erasing all of its small dip on the BTC flash-crash and moving back above $42000…

Source: Bloomberg

The dollar drop also helped push gold back above $1800…

Oil pries whipsawed today, with WTI testing down to an $80 handle before bouncing back near $83…

NatGas was clubbed like a bay seal today, back below $6…

Finally, we note that despite Lagarde’s efforts today, the European rates market shifted even more hawkish, now pricing in 1.6 rate-hikes by September 2022 (in line with expectations for the Fed)…

Source: Bloomberg

We can’t help but think the stock market is not pricing in such a hawkish view (or everyone believes as usual they are smarter than everyone else and there’s still some gains to be made before the house of cards falls).