‘Value’ Stocks Puked, ‘Growth’ Gains, As Heavy Flow Hammers Bonds

A long weekend to think about how ‘not-goldilocks’ the jobs data really was combined with disappointing manufacturing orders data this morning prompted a bid for Nasdaq (safety in the MAG7) and selling in Small Caps as rates rose (this is since the Friday close and include futures from yesterday). Some late-day selling pressure wiped some of the lipstic off the tech pig leaving Russell 2000 down over 2%, Dow & S&P down around 0.5% and Nasdaq only marginally higher from Friday’s close…

This was the Nasdaq’s second best performance relative to the Russell 2000 since Nov 2021, breaking out to a new cycle high. The last time Nasdaq/Russell 2000 traded here was March 2000 – the very peak of the dotcom bubble…

Value stocks saw their 2nd biggest decline relative to growth since May today, breaking below July’s lows…

To its weakest since Dec 2021…

After surging last week, Homebuilders were hammered lower today as fears of higher rates and cooling labor markets finally weighed on the stocks…

…but they’ve got a long way to fall given the macro data…

Source: Bloomberg

‘Most Shorted’ stocks were slammed lower, erasing Friday’s post-payrolls squeeze…

Source: Bloomberg

Bonds were a non-stop sell-fest today thanks to a very heavy calendar with the entire curve up around 7-8bps (after rising 2bps in futures land yesterday)…

Source: Bloomberg

As Bloomberg notes, at least 40 businesses are tapping high-grade bond markets around the world on Tuesday, looking to lock in borrowing costs ahead of crucial releases of economic data and central bank policy decisions. About half of those deals are underway in the US, where it’s shaping up to be the busiest day of issuance since Jan. 3. At least six US high-grade corporate bond issuers have slated offerings for Tuesday; sales are expected to total about $120b this month, a seasonally heavy month that normally sees issuance concentrated in the week or so after US Labor Day.

Well the weight of the issuance on the Treasury market did nothing to scare off equity investors who shrugged off the recent strong relationship between yields and equity prices…

Source: Bloomberg

The dollar soared higher today (best day since March), up 3 of the last 4 days to its strongest since March (biggest 4-day jump since Feb)…

Source: Bloomberg

Bitcoin slid lower, back below $26,000…

Source: Bloomberg

Dollar strength weighed on gold, dragging the precious metal (spot) down to $1925

Source: Bloomberg

Oil prices soared after the OPEC+ headlines, pushing WTI above $88 (its highest since Nov 2022). WTI is up 8 straight days today…

Source: Bloomberg

And what does soaring oil prices mean? Soaring gas prices – now at their highest for this time of year since 2012 (and 2nd highest ever)…

Source: Bloomberg

Finally, we note that, with a US recession on the horizon, gold will probably outperform stocks. As Bloomberg’s Nour Al Ali reports, measured using the ratio of gold prices to S&P 500 total returns, the metal has comfortably come out on top from the start to the end of each of the past three US recessions…

Source: Bloomberg

During the 2000 event, the ratio went from 0.15 to 0.17 over the period defined by NBER. During the global financial crisis it nearly doubled from 0.34 to 0.62, and in the Covid recession, it climbed from 0.23 to 0.28.

So today’s decline in the barbarous relic is a buying opportunity?