More ominous Omicron headlines from Europe hit futures overnight and then a hotter than expected PPI legged futs down again. The cash open ignited the usual momo ramp but it failed fast and stocks slipped into the European close… gently drifting higher after that. Nasdaq was the laggard and The Dow the least bad horse in the glue factory (desperately trying to get green before everything tumbled into the close like yestereday)…
So no pre-emptive ramp into the Fed meeting as no one did anything to tamp down the hawkish shift in rate-hike trajectories since the last meeting…
Is the constant flattening of the yield curve since the last FOMC meeting sending a loud message to Powell…
“Your policy path will fail…”
Under the hood of the S&P 500 reveals some expected outperformers – Financials (higher rates), Energy (commodities, inflationary), and Materials (same as Energy) – as well as some more unexpected leaders, including Consumer Staples and Utilities, both of which are more defensive, and which may suggest a return of some of the ‘stagflation’ concerns from earlier this year.
Source: Bloomberg
‘Meme Stocks’ were monkeyhammered back to their lowest since January…
Source: Bloomberg
MSFT dumped over 4% – its biggest drop since Oct 2020 – and TSLA tumbled further, back below the magical $1 trillion market cap level…
Source: Bloomberg
Between the Federal Reserve’s appetite for faster tapering and a fresh wave of pandemic jitters, investors in some of the most-hated stocks in the U.S. are taking no chances. As a result, a Goldman Sachs basket of the 50 most-shorted stocks has plummeted into a bear market for the first time since June, ringing up gains for traders who sell shares they’d borrowed in hopes of buying them back at lower prices. Short sellers just scored the best three-day run in 17 months amid a 8.6% plunge in the most-shorted index during that time.
Source: Bloomberg
Treasuries were sold across the board today but the knee-jerk spike in yields after the soaring PPI was quickly erased…
Source: Bloomberg
The dollar dumped and pumped today, ramping back to the top of the Powell-Pivot spike after PPI. The dollar is still notably stronger since the last FOMC…
Source: Bloomberg
Cryptos were – for once – relatively quiet today…
Source: Bloomberg
Commodities were all lower today as we note that the Bloomberg Commodity Index has definitively broke it up-trend-line…
Source: Bloomberg
Finally, the ghost of the tech bubble could soon come back to haunt investors, as U.S. equities’ lofty valuations may be threatened by the likely tightening of monetary policy. As Bloomberg reports, the S&P 500 Index’s long-term price-to-earnings ratio, which compares the current price with the 10-year average real earnings per share, has reached 37, a level last seen in 2000.
“Valuations are extremely high on almost any metric,” Deutsche Bank AG strategists said in a note. “Equity valuations are in the 97-100th percentile on almost any metric excluding the 1990s tech bubble period and well into the 90s in percentile terms even including it.”
