Stocks Touch Record Highs: Full Wednesday Visual Recap

Stocks hit record highs because you know, “sacred cow” and also because of some reassuring words from the President…

Eventually

Stocks

After a day in which it spent some time in double-digits, the VIX stayed at a 9-handle all day:

VIX

Oil rose to a near six-week high after the EIA report showed crude and product stockpiles fell last week with gasoline supplies falling to the lowest level since December. Of course crude production rose. U.S. crude inventories drew 4.73m bbl last week – that compares to the 1.63m bbl build API reported on Tuesday afternoon. Gasoline supplies drew to the tune of -4.45m bbl, the biggest drop since March:

OIl

“The combination of lower oil inventories, lower gasoline and diesel, that trifecta is supportive for higher prices, so that’s a good thing,” Rob Thummel, managing director and portfolio manager at Tortoise Capital Advisors, which manages $16b in energy-related assets, told Bloomberg by phone, adding that “we’re continuing to see the trend of lower inventories, not just in oil, but also gasoline as well.” We’ll see how it pans out, Rob.

This helped energy and drillers lead S&P gains. Here’s XLE and XOP:

XLE

The T-bill curve is inverted as investors are freaking out about the debt ceiling (remember this: “we’re going to do so much winning”?):

TBill

Here’s some color on that rather unfortunate state of affairs:

  • Underperformance by the Oct. 19 maturity — shorter- and longer- maturity bill yields rose less — may reflect the market’s best estimate of the drop-dead date; its 1.093% yield compares with bill yields of 1.083% for the Oct. 26 maturity and 1.059% for Nov. 30
  • “The recent three-month bill coincides with when you could see bills being affected” and comes sooner than expected, Jefferies economist Thomas Simons said. “These are the kinds of yields you’d be likely to see in late September. It doesn’t fit with the usual debt ceiling histrionics”
  • While Treasury Secretary Mnuchin has yet to inform Congress of the exact date the U.S. government will exhaust its extraordinary measures, the Congressional Budget Office projection places the drop-dead date sometime in early- to mid-October
  • Goldman Sachs lowered its FY17 borrowing estimates Wednesday, citing effect of the debt limit on Treasury’s cash balance and timing of issuance, and said it expects Treasury to exhaust its borrowing capacity in the “first few days of October”
  • Jefferies, Credit Suisse have forecast an early-October deadline, and BofA said large Social Security, Medicare and military trust-fund payments due at the beginning of October may pull the “X date” forward

European shares rebounded off their worst loss of the month, rising the most in a week, amid positive earnings reports and ahead of Thursday’s ECB decision.

SX5E

Keep a close eye on that because it appears European equities have finally had all they can stomach of a stronger currency:

Eurostoxx

Speaking of the euro, it took a breather and moved off a 15-month high amid lackluster trading, profit-taking (you’ve gotta think), and a wait-and-see approach ahead of the ECB. Don’t get complacent there though, because they need to be really – really – careful with the messaging tomorrow.

EURUSD

“President Draghi will certainly have his work cut out in keeping a lid on the euro at this rate,” Michael Hewson, chief market analyst at CMC Markets U.K., wrote in a note on Wednesday. “A move to the 1.20 level is a distinct possibility on a break of 1.1620 and last year’s high,” he added.

If they do anything that triggers a break higher in bund yields, it will reverberate though DM rates.

DE10y

USDJPY hit its lowest since June 27. “USD/JPY has trailed dollar losses elsewhere in recent sessions, and Wednesday’s decline may have been exacerbated by a 0.6 percent decline in EUR/JPY as traders pared euro longs ahead of Thursday’s meetings of the BOJ and ECB,” Bloomberg wrote this afternoon.

USDJPY

Emerging market stocks have had a good run, buoyed by EMFX strength and strong earnings:

EEM

Oh, and it’s worth noting that overnight on Wednesday, the SHCOMP regained its footing after Chinese shares (most notably the ChiNext) nosedived earlier this week.

SHCOMP

Finally, don’t worry about this:

AssetPurchases

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