• Ugly day for stocks. As it was an ugly day everywhere. Europe getting worse at an accelerating rate, and it’s not clear if there are any quick fixes available this time. Technicals might start getting worse too. Below 1220 in SPX and 1130 becomes the target (head and shoulders pattern). Though hedge funds were much better sellers on the day, long-only buying the dip rather aggressively, health care and energy names in particular. SPX drops 47 to close 1229 (-3.67%). The DOW drops 389 to close 11781 (-3.20%). The NASDAQ drops 106 to close 2622 (-3.88%).
• The VIX adds 8.68 to close 36.16.
• EURUSD sheds 2% today – that’s as serious as downdrafts in the pair get. Post 2008, there have only been two days that have seen bigger losses. Flow was far from overwhelming. Of course EURO downside was in vogue (EURUSD and EURGBP particularly) but considering the magnitude of the goings-on in Europe, the mood is surprisingly sanguine. Elsewhere, CE3 under significant pressure as well. Basically turbo-charged EURO trades at this point. USDJPY finally below 78, but only modestly so. Still the least interesting cross in FX.
• Even an uncharacteristically poor 10y refunding auction couldn’t keep Treasuries down today: the market bull flattened with 5s30s finishing the day 3.7bps lower. The overnight news of LCH increasing IM on Italian collateral by 5% set the tone, lending a bid to rates and pushing spreads wider across the curve by as much as 5bps. The price action provided little set up for the 10y auction, and the 24b in supply came 2bps cheap to the 1pm level. The reaction was muted however, and we saw real money and fast money buying the dip while we rallied into the close.
• In credit, the market opened significantly wider in spread and continued throughout the day. IG initially outperformed, but as we moved towards the afternoon session spreads moved wider on light volumes. HY was weak throughout the session, although coming into the close we started to see opportunistic buyers of risk.
• Oil tried to buck the trend of commodity weakness. Following some very bullish stats, WTI rallied a quick $3. But with stocks getting hammered, the decoupling didn’t last long. Elsewhere, gold drops 1%, silver 2.5%.
• Tomorrow brings Germany, France, Norway and Sweden CPI; Italy IP; and the US Trade Balance. Fed Chairman Bernanke will speak in Texas and the BoE will announce Rates. The ECB will publish their November Monthly Report and the EC will release Economic Growth Forecasts.
(20min delay)