Stocks & Bonds Suffer Worst Day In A Month As Year-End Looms

"But everyone else was long too, right?"

Stock and bond prices were both down today - adding up to the worst combined day since 12/2

Source: Bloomberg

US Major equity indices were all lower on the day, despite a valiant attempt at a bounce...

Source: Bloomberg

Chinese markets were higher overnight...

Source: Bloomberg

European stocks were lower today...

Source: Bloomberg

US markets perfectly reflected AAPL today as the buyback machine lifted the market then stalled...

US Majors also broke the December uptrend line today...

And Nasdaq fell (for the 2nd day) back below the key 9,000 level...

FANG stocks have erased last week's gains (biggest daily drop in six weeks)...

Shorts were squeezed as Europe closed, and managed to lift Small Caps to green, but could not hold it...

Source: Bloomberg

A 'mini' rotation today from TSLA into NIO?

 

VIX and stocks continued to decouple...

Source: Bloomberg

Credit and equity protection majorly decoupled...

Source: Bloomberg

Bond yields (up) and stocks (down) recoupled today after the decoupling from 12/20...

Source: Bloomberg

Once again the old pattern of EU selling and US buying is back for bonds...

Source: Bloomberg

The 30Y Yield ramped (illquidly) above last week's highs before tumbling back...

Source: Bloomberg

The yield curve (2s10s) pushed to its steepest since Oct 2018...

Source: Bloomberg

The Dollar accelerated lower again today with a small rebound after Europe closed...

Source: Bloomberg

The Dollar hit 6-month lows...

Source: Bloomberg

Cryptos gave back their weekend gains today (but Ethereum remains higher)...

Source: Bloomberg

Bitcoin topped $7500 over the weekend but slipped back to $7200 intraday today...

Source: Bloomberg

Silver had another good day as copper and crude lagged (despite an implicit rate cut in China)...

Source: Bloomberg

According to the commodity complex (copper/gold), Treasury yields should be notably lower...

Source: Bloomberg

What does gold know about a resurgence in global negative-yielding debt?

Source: Bloomberg

Finally, Ed Yardeni's Fundamental Stock Market Indicator is signaling the S&P is 20% rich to reality...

Source: Bloomberg

Stocks Are Tanking, Gold Gains As Cash Markets Open

It appears the US cash market open is a 'bearish' event now.

After ramping gently overnight, US equity markets are dumping as markets open, erasing all gains from the Boxing Day spike...

So much for the Santa Claus Rally...

Treasuries are bid after their yield spike...

And gold is rallying...

The Hour Is Getting Late

After 11 years of "the Fed is the market" expansion, the Fed has now reduced its bloated balance sheet by 6.7%. This is normal, right?

So here we are in Year 11 of the longest economic expansion/ stock market bubble in recent history, and by any measure, the hour is getting late, to quote Mr. Dylan:

So let us not talk falsely now
the hour is getting late
Bob Dylan, "All Along the Watchtower"

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The question is: what would happen if we stop talking falsely? What would happen if we started talking about end-of-cycle rumblings, extreme disconnects between stocks and the real economy, the fact that "the Fed is the market" for 11 years running, that diminishing returns are setting in, as the Fed had to panic-print $400 billion in a few weeks to keep this sucker from going down, and that trees don't grow to the troposphere, no matter how much the Fed fertilizes them?

When do we stop talking falsely about expansions that never end, and stock melt-ups that never end? Just as there is a beginning, there is always an ending, and yet here we are in Year Eleven, talking as if the expansion and the stock market bubble can keep going another eleven years because "the Fed has our backs."

Take a quick glance at the chart below of the Fed balance sheet and tell me this is just the usual plain-vanilla, ho-hum, nothing out of the ordinary Year 11 of a "recovery" that will run to 15 years and then 20 years and then 50 years--as long as the Fed panic-prints, there's no end in sight.

So after 9 years of "recovery," the Fed finally starts reducing its balance sheet, peeling off about $700 billion over the course of 18 months.

Nice--only $3 trillion more to dump to return to the pre-crisis asset levels of less than $800 billion. In other words, the Fed's "normalization" was a travesty of a mockery of a sham, a pathetically modest reduction that barely made a dent in its bloated balance sheet.

Knock a couple trillion off and we'll be impressed with your "normalization."

But wait--what's this panic-printing expansion of $400 billion practically overnight? Is this just your typical "mid-cycle adjustment" in Year 11 of a 25-year expansion / stock market bubble? Or is it an "early cycle adjustment" because the Bull Market Bubble will run 50 or 100 years without any pesky recessions or crashes?

After 11 years of "the Fed is the market" expansion, the Fed has now reduced its bloated balance sheet by 6.7%. This is normal, right? Just your typical "mid-course adjustment," right?

Clearly, we can't stop talking falsely now because acknowledging the precarious state of the expansion and bubble is too dangerous: merely acknowledging reality might trigger a collapse.

But really: if everything is nominal, why did the Fed respond to an unannounced financial crisis with such panic? Why panic-print over $400 billion in a few weeks if everything is running hot and true?

Do your own analysis of this chart, but please stop talking falsely about how much longer this can run on Fed panic-printing: the hour is getting late.

Dallas Fed Contracts For 3rd Straight Month, Confirming Regional Survey Slump

Against expectations of a rebound to 0.0, The Dallas Fed Manufacturing Outlook survey disappointed in December, sliding from -1.3 to -3.2 - in contraction for the 3rd straight month...

The Dallas Fed survey has been in contraction for 7 months this year...

Source: Bloomberg

Fed's Kaplan Sees Risks to Outlook as 'Fairly Balanced'

Under the hood was just as unimpressive with New Orders Growth rate contracting and Finished goods contracting along with the six-month outlook dropping further.

Dallas joins, Philadelphia, Kansas, Chicago, and Richmond in their regional weakness in December..

Source: Bloomberg

But, but , but, The Fed is on hold!?

Yardeni Warns 20% Pullback Could Strike Early Next Year

Veteran Wall Street strategist and Yardeni Research founder Ed Yardeni told CNBC on Friday that the stock market melt-up could run into exhaustion because valuation multiples are getting too rich.

"I'm concerned about a possible melt-up here," Yardeni said. "I've been shooting for 3,500 for the S&P 500 by the end of next year, and we're getting closer. Faster than I would have expected."

He warned: ″[A] 10% to 20% [correction] would be quite possible if this market gets to 3,500 well ahead of my schedule." 

Yardeni said he's concerned about the market's latest melt-up and how everyone isn't worried anymore. 

"This is not a cheap market," Yardeni said. "In early October, I looked around and said, 'you know, maybe there's some value overseas. So maybe you really got to look at emerging markets.'" 

Several months ago, Yardeni sounded more carefree, appearing on CNBC to discuss his 2020 year-end S&P 500 target of 3,500 (about 8% higher from Monday morning prices). 

In Nov., he warned valuations might have finally become stretched to the point that dangerously rapid "melt-ups" to new ATHs could prove destabilizing. 

He also said that if the S&P 500 forward earnings multiple hits 19 or 20 (compared with roughly 17 right now, which is above the long-term norm of 15-16), investors could risk sparking a "nasty correction." However, Yardeni focuses on forward earnings in his interview; his propriety Yardeni fundamental indicator is also beginning to reflect euphoric sentiment.

A close-up suggests why the decoupling occurred...

The surge of liquidity via the Federal Reserve's NOT 'Quantitative Easing' has been responsible for the market rising every single week since the program was activated, despite collapsing fundamentals. 

Yardeni warned he wouldn't be buying US stocks at the moment and said wait for the next pullback.