Folks, the bottom just fell out on you.
Cue Kelly Evans:
To be clear, the stage was set for this and if you didn’t see the writing on the wall, well then I’m not sure what to tell you. Valuations are stretched the breaking point, political turmoil is mounting with Trump increasing the vitriol on Monday ahead of (another) shutdown deadline, debt limit jitters are back, the bond selloff has everyone worried, positioning is extreme, there are market structure issues that no one knows how to appraise (VIX ETP rebalance risk, the possibility of a systematic unwind), and on, and fucking on.
Although stocks did manage to turn green after a rocky open, losses begin to accelerate in the afternoon. There are innumerable factoids to pull out of Monday’s action, but one obvious point is that the S&P snapped the longest streak in history without a 5% pullback.
The index went negative for the year just after 3:10 in New York:
The Dow’s YTD gains… gone around the same time:
After that, the losses began to pile up in earnest and the headlines became more alarmist. This is what “panic” looks like:
At the session low, the Dow was down 6%:
By the time it was all said and done both the Dow and the S&P had careened lower by more than 4%. This was the worst single day for the S&P since 2011:
Same for the Dow:
Worst day for the Nasdaq since Brexit:
Gold and the yen were bid as the pain accelerated.
And the paradox emerged: although the proximate cause for all the jitters has been rising yields, eventually a safe-haven bid emerged for Treasurys, driving 10Y yields lower:
As Bloomberg notes, “between 3pm-3:10pm ET, 266k TYH8 contracts traded in screens as 10Y yields reached 2.705% before rebounding to 2.75%, richer by 9bp on the day.”
“The turn in equities has now turned vicious enough that it has pulled U.S bond yields sharply lower, of which the yen has been the main beneficiary,” Deutsche Bank’s Alan Ruskin said, adding that “equities are so incredibly volatile – both the drop and immediate/current recovery – that tangential markets like FX are struggling to keep up.”
The VIX: parabolic:
“Don’t measure it in percentage terms!”, they’ll shout. But if you did:
You read that right. At one point, the VIX more than doubled to 35.7. That’s the highest since August 2015 and the largest one-day spike in history.
Here’s the Nasdaq VIX:
Target managers-turned vol. sellers are getting their asses handed to them (note the annotation):
Emerging market stocks: bloodbath. Worst day since December 2016:
That HY chart Jeff Gundlach said “looks like death” last week? Yeah, more of that:
Europe was closed by the time things really started to go awry on Wall Street, but the Stoxx 600 and the DAX are both negative for 2018:
At this point, it’s probably safe to say that what happened in Asia on Monday is going to get worse, at least at the open. I mean I could be wrong, but you read everything above, right?
But for those of you who need a reminder about the setup for all of this, the Nikkei had its worst day since the U.S. election on Monday:
And the Kosdaq plunged 4%, even as the Kospi generally help up ok:
We used it earlier and it’s even funnier now…
Now let’s see how the White House reacts…