Don’t be fooled by the quiet action in the equity markets. Today was a big day.But first, the equity market scoreboard:
S&P 500: +0.02
And now, the top stories:
- The day started off on the downside in Asia. A move by Chinese authorities to hike gasoline prices by 3% may have contributed to the fall, which was not all that dramatic. It was, however, a break from the full-steam-ahead bubbleness of the Chinese market.
- Europe was fairly quiet and headline free. The UK reported a very strong GDP report, but equities weren’t helped much by it, likely due to the belief that it was stimulus-driven, and thus will be reversed when the UK’s harsh austerity kicks in. The pound did rally against the dollar, however.
- Heading into the pre-market US futures oscillated between down modestly and the flat-line. Then at 9:00 AM AT the August Case-Shiller numbers came out, and they were clearly weak. 15 out of the 20 markets surveyed saw a sequential, seasonally-adjusted decline. The headline gain of 1.7% year-over-year was beneath expectations. Markets sagged a bit on the news.
- But equities, anyway, couldn’t be held down for long, despite the fact that the dollar surged all night and through the morning against most major rivals, with an especially big gain against the Yen. This is what made today remarkable, and showed that it’s in keeping with recent action. Stocks are rallying on dollar-up and dollar-down days right now, and equities are outperforming gold.
- What was weak? Treasuries were. The 30-year sold off some more, with yield looking to go past 4% momentarily. The 10-year is starting to fall out of the bed too. Bottom line: the easy-money quantitative easing trade — buy Treasuries, buy gold, buy the yen, buy the Swiss Franc, etc. is fading. At least it appears to be.
- As for earnings news, there was really notable weakness in the steel names (Arcelor, Nucor), which reported weak sales, lousy margins, and higher capacity. Ford came through with a predictably decent quarterly report, which everyone saw coming.