Stocks Shrug As Taper Tantrum Sparks Bond Bloodbath; Beijing Batters Bitcoin

Stocks Shrug As Taper Tantrum Sparks Bond Bloodbath; Beijing Batters Bitcoin

US equity markets rebounded from Monday’s pukefest on Evergrande fears (which actually came to be realized as the giant property developer did indeed default on its foreign dollar bonds). But then headlines about SOEs preparing for collapse and the payment of a local yuan bond’s coupon seemed to spark exuberance. A brief taper tantrum ensued in equities after the FOMC statement, which ignited momentum higher and shorts were squeezed as rates spiked. The surge in rates, however, hammered the growthier assets and Nasdaq underperformed, ending the week lower (for the 3rd straight week), while Small Caps (value) outperformed.

In case anyone doubts that algos are running the show – just look at how Nasdaq futs were levitated desperately to get back to unchanged on the week. Additionally, 4450 was the key level for S&P…

…pinned by today’s option expiration…

Source: SpotGamma

If one were to guess the S&P’s weekly performance after everything that happened – Evergrande’s missed coupon payment, Evergrande’s EV unit liquidity crunch, more hawkish than expected FOMC/BOE decisions, the FDX/NKE outlook cuts signaling supply chain stress is here to stay, chaos in DC with debt ceiling doubts and complete uncertainty over the size (if any) of a new stimulus bill, crypto carnage, and weak seasonals – we suspect the vast majority of people would have predicted steep declines… as opposed to modest gains.

(h/t @knowledge_vital)

BTFD, right? ‘Bad news is good news’ right?

After the Monday rout, the short squeeze was unleashed and got back to even on Thursday… running out of ammo again to maintain the lift into Friday…

Source: Bloomberg

Notably the rotation back to Small Caps (value) from Nasdaq (growth) stalled today at a key resistance level…

Energy stocks went from worst to first this week after plunging almost 6% on Monday to ending the week over 3% higher (followed by Financials). Utes  were the biggest losers…

Source: Bloomberg

Evergande’s dollar bonds are trading 25c on the dollar and the stocks tumbled another 7% this week (helped by a brief reprieve midweek which was reversed quite quickly) following last week’s 30% plunge…

Source: Bloomberg

Oh, and don’t forget the debt ceiling debacle looms over all of this…

Source: Bloomberg

Oh, and the market is now pricing in at least one rate hike by the end of 2022…

Source: Bloomberg

Treasury yields rose for the 5th straight week (biggest weekly spike in yields since March). Notably, the move was entirely contained in the last two days which were the biggest 2-day spike since the first week of March. Aside from 2Y, the move was surprisingly uniform with the entire curve up around 9bps…

Source: Bloomberg

2Y yields rose back above FF and 5Y yields pushed up to their highest since February

Source: Bloomberg

30Y Yields spiked up to post-payrolls highs…

Source: Bloomberg

The Dollar ended marginally higher on the week but was whipsawed around on China and Fed headlines…

Source: Bloomberg

Cryptos were clubbed like a baby seal this week, hit on liquidity needs around Evergrande’s broad-based degrossing and on China’s statement making crypto transactions “illegal”. Bitcoin was actually the least bad horse in the glue factory but everything was hit…

Source: Bloomberg

Bitcoin has remained above $40k though for now…

Source: Bloomberg

Bitcoin found support at its 100DMA three times this week…

Source: Bloomberg

A noisy week for commodities saw Crude outperforming along with modest gains for copper while PMs were very modestly lower…

Source: Bloomberg

WTI rallied back above $74, its highest since mid-July…

Source: Bloomberg

And gold ended back below $1800…

Finally, Goldman had a warning this week. Valuation is not typically the cause of a bubble bursting and stocks can stay ‘expensive’ for a long time.

But over a long time, the returns that you might expect to get from investing in equities tend to be far smaller when you buy stocks at high valuations than when you buy them when they are ‘cheap’.

Oh and remember, tapering is not tightening so BTFD!?

Source: Bloomberg

You are here.

Tyler Durden
Fri, 09/24/2021 – 16:01

Share DeepPol