D.C. Drama Damages Trump Trades: Bonds Bid As Banks Bloodbath Most Since Brexit

It's about time…

What will today's damage do to Trumphoria and the hope trade?

While many pointed to fears over Trumpcare votes (and delays to any tax/banking reform agenda) as the catalyst for today, it was the demise of the dollar long that ignited the downward momentum in risk assets… (NOTE: The Dollar Index dropped back below 100.00 and Bloomberg Dollar Index dropped back to near election lows)

And judging by the still majorly net long USD positioning in FX futures, this dollar slide is far from over…

The potential for delays combined with a dovish-sounding Fed has sparked panic-selling in bank stocks… BofA is now down over 10% from the post-Trump speech to Congress highs…

This is the worst day for US banks since Brexit…(with the S&P Financial ETF busting below its 50DMA) – Bank Stocks are now unchanged since Dec 7th

Slamming the "Big 4" US banks back below $1 trillion

As a reminder – the gap between the exuberance of rising rates and bank stock prices is very wide…

And the credit market never bought it anyway…

Since The Fed hiked rates, gold and bonds are surging, stock indices are red and Banks are battered…

Today was the first 1% drop in the S&P and Dow since October 11th… Small Caps, Trannies, and Nasdaq worst day since September 9th,

Small Caps and Trannies are negative YTD…

VIX was chaotic in the last hour but did not help stocks… The Dow is now down over 500 points from its record highs back at 6 week lows…

Some technicals:

Transports broke below 100DMA
Small Caps broke below 50DMA, nears 100DMA
Financials broke below 50DMA
High Yield Bond ETF (HYG) broke below 100DMA
Biotechs dropped near 50DMA
VIX broke above 100DMA
Retail (XRT) lowest since June 2016
Treasury ETF (TLT) broke above 50DMA
Silver broke above 50DMA

Liquidity collapsed intraday but the machines came back with a veangance into the close..

Source: Nanex LLC

Seems like it's about time (S&P is up 4% YTD, 2017 EPS -1% YTD)

AAPL saw another upgrade this morning – pushing it to fresh record highs – before it plunged most since December 1st

Retail Stocks tumbled further – to 6-week lows…

But as Bloomberg noted, while retailer stocks fall further, sales of downside puts in KSS, URBN, GPS, RL, WSM and DKS indicate sentiment may be turning.

KSS ~20k April $35 puts sold for ~56c vs open interest of ~2.5k
URBN ~20k April $21 puts were sold for 31c vs open interest of 213
GPS ~6.6k April $21 puts were sold for 31c vs open interest of ~1.9k
RL ~3.2k April $75 puts were sold for 85c vs open interest of ~6k
WSM ~5.4k April $45 puts were sold for 45c vs open interest of ~1.2k
DKS ~3.7k April $44 puts were sold for ~42c vs open interest of 805

The cumulative notional at each strike for each company is equal to ~200m.

Biotechs were battered most in 2 months after Trump comments overnight..

How much further do stocks have to fall?

High yield bond prices plunged…

Treasury yields tumbled lower on the day… (with the belly of the curve now notably lower in yield post-Fed rate hike)

Pushing 7Y, 10Y, and 30Y yields lower on the year…

And 5Y Real Yields back into negative territory…

Lots of relative-value indicators lining up but as we warned a week or two back – the spread between bond yields and stock dividend yields had reached an extreme that did not end well the last time…