Fed Hawks Raiding the Stock and Bond Markets

Fed Hawks Raiding the Stock and Bond Markets

Fed Hawks Raiding the Stock and Bond Markets


Friday, both the US stock and bond markets were in free-fall triggered by US Fed “Hawk Talk” early in the day.

The S&P 500 Index dove 2% in its biggest drop since the Brexit vote, US Treasuries slumped, sending the yield on the 10-year note to the highest since June.

The last time this happened was on 3 December 2015, when Fed Chairwoman Janet Yellen indicated the conditions for higher rates in the US had been met. We have not seen declines this big on the same day since 20 June 2013, the start of the Fed taper tantrum, when then-Chairman Ben S. Bernanke said the Fed may start reducing bond purchases that had driven gains in the global markets.

Today’s action reinforced a Y 2016 trend in which disparate assets post unified moves. The increased correlation can be seen in a Credit Suisse gauge tracking price relationships in equities, credit, currencies and commodities, which sits at the highest since at least Y 2008.

The selloff started Thursday when European Central Bank (ECB) President Mario Draghi downplayed the need for more measures to boost growth. Declines accelerated Friday as Boston Fed President Eric Rosengren warned against waiting too long to raise interest rates.

Friday, the US major stock market indexes finished at: DJIA -394.46 at 18085.45, NAS Comp -133.57 at 5125.91, S&P 500 -53.49 at 2127.81

Volume: Trade was heavy with over 1-B/shares exchanged on the NYSE

  • Russell 2000: +7.7% YTD
  • S&P 500: +4.1% YTD
  • DJIA: +3.8% YTD
  • NAS Comp: +2.4% YTD

HeffX-LTN’s Analysis for 9 September 2016

  1. DIA Neutral
  2. SPY Neutral
  3. QQQ Neutral
  4. VXX Neutral

Have a terrific weekend.

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