Overnight, economic data wasn't as bad, Philly while at -8.9 was lower than est at -11 , jobless claims lower by -24k and housing starts at -1.4% slightly better than last month's -1.8%. Market was a little undecided whether to look at it as 'good news is good news' or 'good news is bad news'...it didn't matter because the market tanked in the final hours, again could be options related, Dow fell -0.76% or 252pts to 33044, the S&P500 fell below 3900 at 3898 down -0.76% and Nasdaq was off by -0.96% to below 11k at 10852. Nasdaq is the weak link and poised to break below its H&S pattern soon. You can see H&S pattern in Apple, Microsoft, Amazon,...and their earnings are all coming up from next week.
Gold was the big winner overnight, jumping $28 or 1.49% to $1932, now looking like going for $2k. GDX and GDXJ gained 2.6% and 2.7% respectively, while AUD Gold up $52 or 1.9% to $2795. WTI crude back above $80 +1.79% , XLE +1.24%. Lithium stocks were mixed, LIT -0.56%, ALB -1.92%, SQM -0.81%, LAC +0.3% and PLL +1.5%.
Gold Jumps, Dow Dumps YTD Gains As 'Hard Landing' & Debt-Ceiling Fears SurgeBY Zero Hedge
FRIDAY, JAN 20, 2023 - 08:00 AM
The Fed has a problem - as
the 'economy' trends towards recession, the 'labor' market is refusing to take any notice of monetary policy and hawkish jawboning...
Source: BloombergThe risks of a hard-landing recession are soaring as the
yield curve inversion (Powell's favorite indicator is the 3m bill yield 18 m fwd spread to the current 3m Bill) deepens to record lows...
Source: BloombergAnd on top of that, the debt-ceiling fears are back, with
a notable kink appearing in the T-Bill curve around June/July...
As
Jeffrey Frankel opined,'this debt-ceiling fight may be different':As Washington gears up for yet another partisan showdown over whether to raise the debt ceiling, with congressional Republicans seeking concessions from Democrats in exchange for their votes, many are understandably nonchalant about it. Americans feel they have seen this movie before, and the story usually ends with the bickering politicians reaching a last-minute compromise. So, no need to ring the alarm bells. But this reboot could have a different, tragic ending. In the 1955 movie Rebel Without a Cause, James Dean’s character survives a deadly game of “chicken” by jumping out of his car at the last moment while his rival miscalculates and drives off a California cliff. With the US economy barreling toward the cliff’s edge, it is clear that intransigent Republicans have no intention of hitting the brakes. This could mean a once-unthinkable US government default. Unfortunately, letting Republicans drive the US economy off a cliff may be President Joe Biden’s best option right now. But the US still has at least five months to jump out of the car... By then, hopefully, crashing securities markets, outraged beneficiaries, and shifting voter attitudes would finally persuade enough holdouts to raise the debt ceiling. In the meantime, we have no choice but to let this game of chicken play out.But judging by the market's
sudden bid for USA Sovereign credit risk protection (back near record highs), we suggest things are a little more serious this time...
Source: BloombergPiling on, Fed vice-chair Brainard piled on noting that
"rates need to be sufficiently restrictive for some time" and claimed that financial conditions have tightened significantly (true but the last 3 months have seen financial conditions ease back dramatically)...
Source: BloombergFutures drifted lower overnight, accelerating losses during the European session and then again accelerating as the US cash markets opened. The European close, coincided with Fed's Brainard's comments and stocks rebounded but all the majors ended the day in the red for a second day...
The Dow has erased all of its gains YTD...
The S&P 500 opened back below its 50DMA, rallied up to it but stalled and sold off into the close...
The Nasdaq also broke back below its 50DMA today...
"Most Shorted" stocks tumbled for the second day in a row...
Source: BloombergTreasuries were sold today - though only modestly (with the whole curve 3-4bps higher). The whole curve remains lower in yield on the week though, led by the belly...
Source: BloombergThe short-end (STIRs) shifted modestly hawkishly today...
Source: BloombergThe dollar trod water most of the day but limped lower after Europe closed...
Source: BloombergBitcoin rallied back above $21,000 today...
Source: BloombergNotably, bitcoin and big-tech have de-correlated in the last couple of days...
Source: BloombergOil prices rallied on the day, despite a major crude build, as China re-opening fears trumped US domestic recession fears today...
Gold surged to new cycle highs above $1930 - the highest since April 2022...
Finally,
the market remains almost 75bps (3 x 25bps) more dovish than The Fed for where rates are at the end of this year...
Source: Bloomberg
