What Carl giveth, Carl can taketh away. We have warned for a month that credit markets have been decompressing (amid saturation) even as stocks went only one way. The S&P has hit almost its LABIA-based Fed fair-value and VIX/VXV hit extreme complacency levels so we were primed for a fall so it's ironic that Icahn pricked the bubble (at least for one day). More ironic still was CNBC's dismissal of his warning "as he is not a market timer" – when they wait with baited breath for his next 'buy AAPL' tweet. Bill Dudley's economic bullishness (and hawkish policy talk) also weighed on stocks. Credit was weak from the start – even as equities broke to new records; Treasury yields slid all day (with a small bounce higher after Europe closed). The USD's early weakness retraced to unch by teh close – rallying from the US open (but EURJPY was a big driver of weakness in stocks). Commodities did not bounce – all flushed lower around the European close and never recovered as stockd dumped.
No Dear today… but close… (as the NASDAQ test up towards 4000 – managing 3999.47 – before tumbling in its high-beta way…
Credit has been flashing warnings for a while that the game (in the short term at least) is up…
But of course, today's drop in the context of the last month is hardly death for equities – though given our context of a never-falling market, it is a shock…
Spot the difference – Icahn's honesty tanked EURJPY (carry) and thus stocks declined…
FX markets were a roundabot with Europe selling the USD and US buying it…
Treasuries were a one-way street lower in yield (with a bounce at the European close)
Commodities rallied into the US open and European close then tumbled and flatlined all afternoon (even as USD rose and stocks slid)…
VIX bounced notably back above 13%
Charts: Bloomberg
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/CS6RyXNdPAo/story01.htm Tyler Durden