Wall St continued its downward trajectory with the Dow hitting an intraday low of just under 29k before late afternoon buying pared back losses to close 458pts down or -1.54% at 29225, the S&P500 made a second attempt at 3636, hit an intraday low of 3610 before closing just above it (3636) at 3640 , down -2.11%. It was a brutal night for the big techs , the Nasdaq clobbered -2.84% to 10,737 , led by Apple's -4.91% fall (which I mentioned yesterday) , Tesla -6.81%, NVIDIA -4.05%, AMD -6.17% , Meta -3.67% and Amazon -2.72%.
The tech puke was despite US 10yr yield settling at 3.78pc below 4pc. DXY came off sharply to below 112 at 111.95 as I write, helped calming the commodities space, Gold at 1 week high of $1660 and keeping Crude oil above $80. This is one of the few occasions in recent days that Gold and gold equities are moving inversely to the major indices, the GDX up +0.47% and GDXJ +0.88%. It is probably a reflection of increasing concerns over market stress and a systemic event that may have resulted in more money moving into the gold space, which is the correct line of thinking. Except that, one should not forget that should there be a systemic event or contagion or margin calls, everything that should not be sold gets sold down because of a rush to liquidate to raise cash, and as we have seen in the past, Gold and gold equities got caught up as collateral damage. If the Covid 2020 crash served as an example, the rally in gold and gold equities occurred only in the aftermath of the crash and until we truly understand where inflation heads from here, all talk about when to expect the Fed to pivot is both uncertain and premature. Overnight, we saw that German yoy CPI headed for the wrong direction, moving to 10%, getting worse not better. US is not expected to emulate Europe but the expectations of a faster lower print may be a tad too high.
“Risky assets don’t stand a chance of a meaningful rally if the [US] economy continues to show resilience while inflation continues to be significantly above the Fed’s funds rate,” Oanda’s Edward Moya said in a note.
Cleveland Fed chief Loretta Mester reiterated that the US central bank will hold fast to check inflation.
“Real interest rates -- judged by the expectations over the next year of inflation -- have to be in positive territory and held there for a time,” she said earlier in an interview on CNBC. “We’re still not even in restricted territory on the funds rate.”
During a virtual forum, St. Louis Fed boss James Bullard said the volatility in financial markets reflected spillovers from recent events in the UK. “We’re determined to get to the right level of the policy rate in order to put meaningful downward pressure on inflation here,” he told reporters.
The S&P500 is poised to break 3636 and closed below it tonight on two possible reasons - the release of the US PCE numbers tonight and continued weakness in Apple's share price. But while we toy with this prospect, we should also consider that US market now is in oversold territory and the only thing we know about this market is that we're never going to know what is going to happen...it will continue to blindside us and nothing is to be taken for granted. Markets could survive the June lows and head higher into the final months of the year OR market could fall below June lows triggering a cascade of falls that won't lead the economy and markets to a good place.
By now, after all my caution and information provided, you should have already taken necessary steps to brace and protect yourself and Be Ahead of the Curve.
The Crash Just Won't Stop But Today Something Changed
BY Zero Hedge
FRIDAY, SEP 30, 2022 - 06:05 AM
After yesterday's euphoric, BOE-inspired, short-squeezed meltup, today was supposed to be a continuation rally courtesy of one of the most oversold markets in history.
It didn't quite work out that way, and stocks opened into an absolute rout, with the NYSE TICK indicator not turning positive until almost one hour into trading after one of the biggest negative ticks of 2022.
As a result, those who expected yesterday's BOE "temporary QE" pivot would be enough to push stocks higher for at least a few more days - here even some of the biggest pessimists expected this bear market rally to last for 2-3 days at least - were promptly disappointed as stocks tumbled all day, dropping almost to new 2022 lows...
.... in a broad, and high-volume selloff which dragged every sector lower.
The selling which for all intents and purposes pushed stocks to 2022 lows (and the lowest since Nov 2020), meant that spoos are now down 7 of the past 8 days, with today's drop more than wiping out all of yesterday's gains.
But unlike recent selloffs which were mostly catalyzed by surging yields, or a soaring dollar, today we have seen neither, as both 10Y TSY yields (as 30Y gilts have gone nowhere)...
... and the Bloomberg dollar index slumped all day in what would otherwise have been a huge relief for risk assets.
One possible reason for the continued USD weakness: after a modest attempt to rebound, Nov Fed hike odds slumped again, and after pricing in nearly 90% odds of a 75bps in Nov, the odds are back to just 63% and dropping.
But while oil did indeed enjoy the slide in the dollar, avoiding an even bigger rout thanks to a Reuters report that OPEC+ would cut output by 500K-1MMb/d next week...
... the same can not be said for US stocks obviously, as instead of macro traders today were focused on the micro, with Apple tumbling for a second day in a row, and one of its biggest slides in the past year...
... this time following a rare downgrade from BofA.
The continued implosion in AAPL and other tech names has pushed Goldman's most-shorted tech index to March 2020 levels, and is about to take out that particular support, bringing the index back to Dec 2018 levels.
Additionally, the absolute disintegration in used car retailer, Karmax, which lost a quarter of its market cap today following catastrophic earnings and a dire assessment of the industry, certainly did not help the apocalyptic investor sentiment.
