Soft CPI, Sloppy Auction, & Sudden Iran Deal Spark Market Chaos

Well, that was a day.

Mixed inflation data (take your pick on core lower, headline lower, services still really high), higher initial claims (but it’s all fraud) but 2023 lows for continuing claims, a sloppy 30Y auction, and rumors and confirmation of a oil-price-dropping deal with Iran to swap some prisoners for a few billion bucks.

But apart from that, a quiet illiquid summer day which saw oil pump-and-dump, bond yields drop-and-pop, stocks spike-and-puke, gold jump-and-slump, and the dollar purge-and-surge.

Let’s start with stonks. The initial move after CPI was choppy but that quickly became a buying-panic (as it does). However, at around 1000ET, Goldman’s Scott Rubner said “fade the green” and we plunged…

A little late-day relief helped the S&P back (barely) into the green…

0-DTE traders had been fading the post-CPI ramp from the start, fighting non-stop once the S&P broke above 4500 (and won)…

Source: SpotGamma

WeWork exploded higher (up over 125%) erasing the ‘going concern’ collapse…

NVDA continues its decline…right on schedule…

Source: Bloomberg

VIX was marginally lower on the day but VVIX remains in the ‘danger zone’ around 100…

Source: Bloomberg

Treasury yields ended higher on the day across the whole curve (2Y +1bp, 30Y +7bps) but that does not tell the full story as the swings were rather large. All yields are now higher on the week with the belly underperforming…

Source: Bloomberg

An ugly 30Y auction triggered broad-based selling in bonds (and a rip higher in the USDollar) at around 1300ET…

Source: Bloomberg

Rate-hike expectations dropped today with only a 10% chance of a Sept rate-hike now (and 20% odds of a Nov hike). There is now around 150bps of rate-cuts priced in to markets through the end of 2024…

Source: Bloomberg

The dollar ended higher on the day after plunging on CPI…

Source: Bloomberg

Dollar gains weighed on gold, which fell below $1950, round-tripping back to June lows

One can’t help but wonder at the timing of the Iran prisoner-swap decision. With wholesale gasoline and crude prices soaring, the American public is about to be hit by another pocket-book-crushing surge in pump prices…

Source: Bloomberg

President Biden has emptied the SPR and the Saudis are no longer America’s friend (in fact the opposite). So why not throw some cash to Iran and allow them to open up their spigots… It is working… for now… as oil prices tumbled…

Source: Bloomberg

Finally, core CPI slipped lower and there was much jubilation as President Biden continued to take a victory lap over ‘inflation coming down’. Just one thing though: shit’s still super expensive-er, yo!

If you are a human that likes to eat food (in the home or at a restaurant), it now costs you around 20% more than it did under President Trump…

Source: Bloomberg

It’s not disinflation that the average-joe needs, it’s DEFLATION (unless you’re a UPS driver or UAW union member).

One last thing…we’ve seen this malarkey before…

It’s funny how history rhymes. pic.twitter.com/gKhZ7Cqpq6

— Jeffrey Kleintop (@JeffreyKleintop) August 10, 2023

So don’t get too excited.