* The Fed's hawknado 'March cut not likely' depressed stocks that had remained complacent up to the FOMC
* Dow down -317pts , S&P500 dropped -1.62% and Nasdaq a sharper fall -2.23%
* Magnificent 7 stocks retraced notably, Alphabet -7.5%, NVIDIA -1.99%, MSFT -2.69%, Apple -1.94%, Meta -2.48%, Amazon -2.39%
an ugly sea of red https://x.com/unusual_whales/status/1752798534687174731?s=20
* DXY jumped sharply upon Powell's indication that March cut is not likely, to 103.63 from a low of 102.94 even while US 10yr fell below 4pc to 3.92pc, AUD back to Risk off at 65.63c
* Gold rallied to $2056 but fell sharply to $2036 back to where it started on the day, on the Powell's hawkishness, GDX -0.71% and GDXJ -1.31%
* WTI Crude slumped -2.55% to $75.65, oil stocks broadly lower XLE -1.91%
* Lithium stocks plunged, LIT -2.08%, ALB -4.63%, SQM -6.76%, LAC -3.43%, Patriot Battery -5.1%
* As I mentioned frequently, if your sector stocks trade down in the midst of an overall market rally, it is to be expected that they would be more adversely hit when the rally ends and starts correcting
* So the question now is whether the new market narrative is back to 'Good News is Bad News' and an imputation of a delayed and lower rate cuts than the 125bps it had expected; my take is if we do get 125bps cuts this year, the US economy would have entered recession (Gundlach is predicting recession in 2024) but if we get a soft landing (which Powell declines to indicate one way or the other) we won't get as much as 125bps (perhaps 75bps across June/July/Aug).
Stocks, Bond Yields, & Bullion Puke After Powell Pummels Dovish Dreamers, Assails AI
BY Zero Hedge
THURSDAY, FEB 01, 2024 - 08:00 AM
'Soft' survey data continued its trend weaker... Source: Bloomberg
And NYCB shit the bed... Source: Bloomberg
Which is probably why The Fed culled the sentence: "The U.S. banking system is sound and resilient" from its statement!
Not a good look. BUT... The FOMC statement was a total hawkgasm...
And the market's initial reaction followed that guidance. Then the idiot algos bid stocks back to the highs of the day after Powell said he had "confidence" in inflation coming down (but missed the bit about him saying he needed more confidence).
Powell appeared subliminally aware of that and curb-stomped any dovish hope with the following triple-whammy:
*POWELL: DON'T THINK IT'S LIKELY FED WILL CUT IN MARCH
*POWELL: MY GUESS IS PRODUCTIVITY MAY GO BACK TO WHERE WE WERE
*POWELL: PLANNING TO START IN-DEPTH BALANCE SHEET TALKS IN MARCH
So, no March cut, AI gains are temporary, and QT ain't coming by March. The doves cried...
March rate-cut odds tumbled and expectations for 2024 total cuts declined notably... Source: Bloomberg
And the stock market went wild (as evidenced by the swings in TICK). Initial jerk lower (as selling hit in the statement) held until the presser and algos went crazy with a massive buy program... which was then crushed by a just as massive sell program... Source: Bloomberg
Small Caps were the day's biggest loser (down 2.5%!), with The Dow the least ugly horse in the glue factory. The S&P and Nasdaq were ugly...
As 'most shorted' stocks were clubbed like a baby seal. A close up on the day's actions shows the algos doing their best to ignite a squeeze... then failing dismally... Source: Bloomberg
And MAG7 stocks were monkeyhammered (MAG7 basket's worst day since Dec 2022)... Source: Bloomberg
Interestingly, 0-DTE traders fought The Fed all afternoon, with positive delta flow unable to lift stocks.. Source: SpotGamma
Treasury yields were down on the day with the short-end outperforming. The early gains on flight-to-safety bids on NYCB (and weak ADP) were largely erased by the hawkish Fed... Source: Bloomberg
The 10Y Yield pushed back up to 4.00% by the close... Source: Bloomberg
The yield curve (2s30s) bull-steepened on the day, back up near dis-inversion... Source: Bloomberg
The dollar had quite a day with a plunge early on weak ADP and NYCB's collapse. But then screamed up to the highs of the day Source: Bloomberg
Gold was the mirror image of the dollar, ripping higher on flight-to-safety demand as NYCB imploded, then dumping back as a hawkish Fed spoiled the party... Source: Bloomberg
Oil prices accelerated lower today on weak data, a crude build, and hawkish Fed with WTI back below $76.. Source: Bloomberg
Bitcoin ended lower - following the same kind of chaotic swings in the FX and gold... Source: Bloomberg
And finally, we are seeing a return to notable net inflows into Bitcoin ETFs... Source: Bloomberg
...as GBTC outflows appear to be dwindling.
