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February Is Calling, It Wants Its Markets Back

"Harry, we had a setback."

I was only kidding on Wednesday morning when I said a flip in the sign on the equity-rates correlation “presaged locust plagues, pestilence and famine”, but a couple more days like Wednesday and there are going to some folks who feel like they just lived through the apocalypse.

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Stock-Bond Correlation Breaks, Presaging Locust Plague, Pestilence, Famine

It’s time to revisit a tweet from February 6:

To say the close on Wall Street was ugly would be an understatement. This ended up being the third worst point drop for the Dow of the year and that’s saying something considering there were two days in February that saw the benchmark fall 1,000+ points.

Dow

The VIX rose for a fifth consecutive day, the longest streak since January.

VIX

This was the worst day for the Nasdaq since Brexit:

Nasdaq

That underscores how the selloff is being spearheaded by an unwind in Tech/Momentum/Growth or, more to the point, everything that’s worked in the slow-flation world.

Growth underperformed Value by the widest margin since the Goldman “Is FANG mispriced?” note:

ValuGrowth

This was the worst day for the Momentum ETF ever (literally):

MTIM

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Who’s In The Mood For A Good, Old-Fashioned Momentum, Tech Rout?

The S&P fared little better. This was the worst day since the February chaos:

SPX

Surprisingly, given the underperformance in the Nasdaq, the spread between the Nasdaq VIX and the “regular” VIX actually tightened up a bit:

VIXVXN

(Bloomberg)

If you’re in big cap tech, your support is being tested:

NDX

Treasurys finally caught a safe haven bid, but not until the bottom was falling out for stocks in earnest, and the fact that it took an 800 point Dow drop to bring in the dip buyers in bonds speaks volumes about the market’s conviction on the bearish side:

Yields

(Bloomberg)

2-year yields were down handily on the day. Long story short, Treasuries rallied as the stock selloff accelerated, but again, I’m not sure it says much when it takes this kind of slide in equities to bring in the bond buyers.

The “move” in MOVE is starting to look a bit more pronounced. Perhaps the “orderly” bond selloff is about to get “disorderly”:

Move

(Bloomberg)

Remember, today’s bloodbath was brought to you by the fear of what a flip in the equity-rates correlation presages going forward (note how the 52-week correlation is now negative, something that’s only happened sustainably three times in the last two decades).

Corr

(Bloomberg)

Oh, and then this:

Now who’s ready for CPI?!


 

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