Death By A Thousand Cuts.

Well, Tuesday could have gone better.

The bottom line is that between another powerful hurricane approaching the U.S. mainland, U.S. markets catching up with their global counterparts in terms of pricing in North Korea after the long weekend, the DACA decision which portends more bickering in Washington, and the looming debt ceiling debate (with the specter of a technical default showing up in today’s decidedly poor 4-week bill auction), it was death by a thousand cuts.

By the closing bell, it was the worst day for stocks since the Gary Cohn rumor wreaked havoc on markets midway through last month:


Stocks fell hard with the situation deteriorating in earnest about 45 minutes after the DACA decision:


The VIX calmed down a bit into the close, but did manage to give the Target managers a scare after hitting a 14-handle:


Yields fell hard as the market priced in all of the above. Here’s what you need to know there:


Here’s a useful summary from Bloomberg:

  • Treasuries surged over morning session as U.S. investors had their first chance to react to weekend news of heightened North Korea tensions; Hurricane Irma was classed as a Category 5 storm, prompting Florida to declare a state of emergency and adding to haven flows.
  • Cash Treasury yields ended 5bp-9bp across the curve vs Friday close shortly after 3pm ET; 10Y yields tumbled to fresh YTD lows at 2.065%, breaking 61.8% retrace of post-Trump surge
  • Treasury bull-flattening haven rally even more robust as IG credit issuance slate surged to $22.3b from 15 issuers across 31 tranches; issues mainly skewed to non-financial deals and consisting of number of 30Y tranches

Speaking of bullish Treasurys, CTAs look like they’re long again:


(Deutsche Bank)

Finally, here’s the 2s10s (no comment necessary):


Irma is the new Harvey (figuratively and literally).


The (now) Cat. 5 storm had Florida-based property and casualty insurers on the back foot…


… and also triggered panic-buying in orange juice futs:


Financials were hit hard as yields plunged:


As far as gold goes, here’s the only chart you really need:


European shares were largely unchanged as everyone is frozen in time ahead of Draghi on Thursday. Note that the negative correlation between the euro and the EuroStoxx has reasserted itself – and “big league” (rising euro bad for European stocks):


So you know… make sure you’re buying in dollars:


South Korean shares have fallen for four consecutive sessions amid protestations from the bulls that robust earnings growth and valuations (low multiples) leave the bull thesis intact:


Kospi volatility has risen sharply over the past two days:


The Nikkei fell for a second day on Tuesday amid a stronger yen and generalized angst about whose country the next missile will fly over:


The “yuan as a safe haven” theme finally took a breather on Tuesday as USDCNH rose for the first time in 15(!) sessions, after a weaker-than-expected fix from the PBoC temporarily put the brakes on:


Finally: Albert Edwards was right…


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4 thoughts on “Death By A Thousand Cuts.

  1. Today is only 9/5.
    By 9/9 the dip should probably be greater.
    Tropical storm Jose, just formed east of the Leward Antilles,
    May signal the train is camping up.
    And then we have DPRK Day.
    As I posted earlier on Japan’s plans, have we missed anything?
    Possibly a birthday present headed for Guam

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