‘Fire And Fury’ In The Afternoon: Stock Rally Slams On Brakes, VIX Jumps

Generally speaking, markets were asleep as trading flows all but dried up with everyone on non-working vacations (unlike Trump, who is definitely “working” during his sojourn up north).

But the calm was shattered at about 3:20 when the President, unable to restrain himself, said this:

Here’s Bloomberg with a quick recap of what happened next:

  • The riskier end of the asset spectrum bore most of the initial reaction to Donald Trump’s comments on North Korea as U.S. equities surrendered 10 points in 30 minutes and the CBOE Volatility Index climbed. The U.S. president said the Asian country will be “met with fire and fury and, frankly, power the likes of which the world has never seen before” if Kim Jong Un’s regime continues to threaten the U.S.
  • S&P 500 fell 0.3% after climbing as much as 0.4%, poised for the biggest intraday reversal since April 5.
  • Traders ran for hedges, pushing the VIX up 12%, the most since July 6

“We are seeing algos kicking in as a result of some inflammatory comments regarding North Korea,” Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. noted.

Here are the visuals, first in stocks and USDJPY:


And in the VIX:


And don’t forget gold:


So there’s your tape bomb – figuratively and literally. Oh, remember this?…

Well anyway, prior to that bombastic proclamation, the dollar got a jolt from JOLTS Job openings data which beat estimates and hit a new record. Here’s some perspective that captures the post-NFP beat (dead cat?) bounce:


Yields jumped on the same news, and that, in turn, helped the financials:


Oil chopped around and traders will of course be keying on the API numbers out after the bell on Wall Street. “Overall inventories are fairly chunky in terms of what needs to be drawn down. We’re getting there, slowly but steadily,” Miswin Mahesh, oil analyst at Energy Aspects in London, said Monday. Meanwhile, the OPEC meeting Abu Dhabi hasn’t brought much in the way of big news.

Obviously the big econ print was China trade data. Exports and imports missed estimates by a pretty wide margin …


… but between the still sizable surplus and stable FX reserves, the yuan hit its strongest since October of last year:


Jacob Zuma survived the no-confidence vote (a story that is amusing if you’re inclined to Google it and spend a few minutes reading) and that hit the rand, which retraced the entirety of its “secret ballot” announcement gains:


As for how to position for Wednesday… find a bomb shelter…



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