‘Good News’ Sends Stocks & Bonds Lower; Oil & Gas Prices Soar

And just like that the narrative flipped back from a ‘growth scare’ to ‘inflation fears’ as Pending Home Sales beat (but that was for May when mortgage rates down-ticked modestly before spiking in June), Durable Goods Orders beat (again this was for May and since then we have seen regional Fed sentiment indicators collapse in June)… all of which up-ticked the Macro Surprise Index by the most since April (admittedly off a very weak, low base)…

Source: Bloomberg

Don’t get too excited though as Dallas Fed’s Manufacturing Index for June was a bloodbath.

Still that up-tick was enough to send rate-hike expectations hawkishly higher once again…

Source: Bloomberg

And stocks lower… With Nasdaq the biggest loser on the day, falling to levels right before Friday’s late-day meltup. The Dow and S&P also closed lower as Small Caps managed to hold on to gains)…

NOTE how choppy/illiquid trading was in futures overnight.

With ‘Most Shorted’ stocks squeezed up to pre-CPI levels but running out of ammo…

Source: Bloomberg

And bond yields higher… With the belly underperforming the wings (but the whole curve up 5-7bps)…

Source: Bloomberg

Credit markets were weaker today…

Source: Bloomberg

US junk is down about 5% so far this month, the worst since the 11.5% collapse of March 2020. Other than in the 1990 and 2008 recession years, credit losses of this magnitude are rare – you’d have to go back to 2002 to find a worse June.

The dollar ended practically unchanged on the day rallying back after the European close…

Source: Bloomberg

Bitcoin tumbled early on after comments from SEC’s Gensler (nothing of particular note but enough to trigger the algos in an illiquid market)…

Source: Bloomberg

Energy prices surge today amid ongoing gas supply restrictions, G-7’s oil price cap discussions and ahead of the OPEC meeting (which UAE suggested would not prompt any increased production of note). WTI topped $110…

And US NatGas recovered some of its Freeport LNG closure losses…

EU NatGas was flat today as US NatGas and WTI converged (on a oil barrel equivalent basis)…

Source: Bloomberg

Gold opened higher overnight but ended lower on the day…

Finally, we note traders appear to be rotating their hedges away from macro overlays (index hedges lifted – which would drive skew lower) into name by single-name idiosyncratic hedges (bidding puts vs calls – driving skew higher)…

And as SpotGamma notes, there has been a change in their Risk Reversal metric to -0.07, which is off from bullish readings of -0.05. This suggests that the flat skew position (which had bullish implications) is steepening (i.e. puts may be catching a bid).