Bonds & Stocks Bid As ‘Bad News’-Buyers Trump CTA-Sellers

‘Bad news’ was certainly good news today as ‘soft’ survey data showed the US Manufacturing sector dropping back into contraction (<50) and Services sliding too (with pries rising), sending US MAcro Surprise dats slumping..

Source: Bloomberg

That gave 2024 rate-cut odds a small lift…

Source: Bloomberg

..which seemed all the markets wanted to be able to extend yesterday’s big squeeze as stocks soared from the open… The Dow was the laggard on the day with Small Caps the biggest gainer, but all the majors ended green…

0-DTE traders faded the opening ramp aggressively but were force to cover as the afternoon wore on. Notably the positive delta flow from 0-DTE did nothing to boost stocks suggesting there were ‘fundamental’ sellers offsetting that flow…

Source: SpotGamma

Yesterday’s ‘short squeeze’ was dwarfed by today’s extending the gains from yesterday’s lows in the ‘most shorted’ basket to today’s highs to over 6%… – the biggest two-day squeeze since late-Feb. We do note that in context, this is not so impressive, but every trend starts as a reversal…

Source: Bloomberg

MAG7 stocks rallied again, but were unable to get back to even on the week and started to run out of steam into close ahead of TSLA’s earnings…

Source: Bloomberg

Continuing the trend of the last two days, Goldman’s trading desk noted that hedgies were buying and long-only’s were selling:

Our floor is skewed 6% better to buy overall with HFs driving most of our flows. The HF demand is a function of Info Tech Buying (again… mix of LC Tech, semis, select SW), Discretionary demand (mostly e-commerce), Industrials, Comms Svcs, Energy, and Staples… Hcare is the only Sector being sold by HFs. Short Ratios are moderate to low today
LOs are selling Info Tech (pockets of SW), Energy selling, Comm Svcs, Fins.

Additionally, they highlighted the following chart showing the number of Nasdaq components below their 50DMA was at the same levels as the October 2023 swing lows as we rip here…

Source: Bloomberg

Notably, Goldman’s ‘Vol Panic’ Index is off the highs… but not by much (ahead of thee big event risk this week)…

Source: Bloomberg

Treasuries were mixed by the close (with 30Y +1bps, 2Y -5bps), but all well off their overnight (pre-bad-news) high yields of the day…

Source: Bloomberg

Once again, 5.00% was too much for the 2Y yield to handle…

Source: Bloomberg

The yield curve steepened dramatically, off pre-CPI levels from last week…

Source: Bloomberg

The dollar dived on the (dovish) bad news, back to Thursday’s lows…

Source: Bloomberg

USDJPY just couldn’t get it together. Twice they tried to rally the JPY against the USD and twice they failed (just look at last Friday too)… Jawboning is just not doing it guys…