Fly Me To The Moon.

Well Thursday was highly amusing, and not so much for the market action, but rather due to the endless stream of over-the-top absurdity that emanated from the White House.

Trump sounds like he’s really leaning towards trying to implement a government-funded program to train and arm high school and middle school teachers in an effort to deter school shooters by transforming educators, lunch ladies, and janitors into spec ops.

Apparently, he’s even going to offer bonuses to teachers who carry guns in the classroom. You can read the piece linked above for all of the details, but here’s Trump with the short version:

There you go. “Mr. President, how would you describe America’s public education system?” “Well you need to know, if you come into our schools, you’re gonna be dead, and it’s gonna be fast.”

And then there was Wilbur Ross who went on CNBC Thursday to explain how the administration is planning to “turn the moon into a gas station.” That’s an actual quote.

Oh, and don’t forget about Council of Economic Advisers Chair Kevin Hassett who said this about market volatility:

 

Yes, “stock market volatility is something that’s to be expected.”  But you know, don’t tell that to Seth Golden and the rest of the big box managers-turned-armchair-vol.-sellers crowd, because trust me, they don’t want to fucking hear it after getting wiped out on February 5.

So that’s how the day went in Trumplandia.

Meanwhile, markets tried to recover from Wednesday’s late afternoon swoon that accompanied the delayed reaction in yields following the Fed minutes. As a reminder, the initial knee-jerk on that was dovish and then carbon-based traders quickly realized that the conciliatory language on inflation didn’t make up for the hawkish take on the economy and the rather explicit nod to continuing the rate hike cycle apace – ultimately, yesterday afternoon was a “wait, what?” moment for some folks.

Thursday brought some relief as yields fell and stocks were generally higher although it’s worth noting that the S&P is having a tough time sustaining a rally over the last several sessions.

SPX

As you can see, the final hour was rough again today. I’m not sure how we’re all supposed to meet Wilbur at his lunar Gas-N’-Go if equities keep doing that. What happened to January’s “to infinity and beyond” market”? This was supposed to be “Icarus unleashed“!

This was the fourth day in a row the Nasdaq has closed lower:

Nasdaq

Bull steepening in Treasurys amid a generalized fading of the Wednesday bond selloff. Here’s 10Y yields panning out to capture last week’s CPI:

Yield

Bottom line: this is a gradual creep higher. And although there is a vociferous debate about what’s driving this, how far it can go, whether it’s the pace that matters or the absolute level, etc. etc., the bottom line is that eventually we’ll hit a threshold on it beyond which equities are going to be in trouble.

The dollar is right back near where it was on Wednesday before the Fed minutes caused a quick downdraft which abruptly reversed as everyone suddenly decided to push real yields higher in response to the Fed’s upbeat take on the economy and the accompanying assumption that the risk to hikes is on the upside. The greenback held onto those gains until midmorning on Thursday when the bottom fell out:

DXY

Two-week high for oil (inventory draw helping to assuage concerns that U.S. supply will offset OPEC cuts):

WTI

In Europe, the sentiment data looks like it might be rolling over. Here’s a smattering:

  • France Feb. Business Confidence Falls to 109 vs 111; Est. 110
  • IFO FEB. GERMAN EXPECTATIONS INDEX AT 105.4; EST. 107.9
  • IFO FEB. GERMAN CURRENT ASSESSMENT INDEX AT 126.3; EST. 127.0
  • IFO FEB. GERMAN BUSINESS CONFIDENCE INDEX AT 115.4; EST. 117.0

Ultimately, European stocks closed largely unchanged and EURUSD didn’t look it was shaken either by the data or by an ECB that came across as dovish in the January minutes:

EURUSD

USDJPY was down sharply. Every leg lower there puts pressure on the BoJ and really, on Japan in general.

Oh, and China reopened after the holiday and it was time to play catchup with the SHCOMP rising the most since August 2016:

SHCOMP

 

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