The Chinese equity market fell half a percent overnight. Hong Kong rose over half a percent, and Japan rose a percent. JGB yields were unch at 6 bps above the BOJ’s target.
European equity markets were up a percent or less this morning, while EU sovereign yields were lower again both in Germany and among the FPIGS.
Over in the US, the equity futures were down a touch ahead of the open. The dollar was mixed vs. other colored paper. Gold was flat. Meanwhile, yields hung around the unchanged mark.
The S&Ps opened down a touch, stutter stepped a little, and we were off to see the wizard… The remainder of the session was a nonstop grind higher until we finally hit our high for the day with about an hour to go for a gain of nearly a percent. There was a slight giveback into the close, but the S&Ps still ended up nearly three quarters of a percent.
The Fed’s Stanley Fischer also notably went on HeeHaw today for an unscheduled interview. It remains to be seen why he felt the need to do this interview today, but it appeared to have little effect on the equity market. The bond market and foreign currencies did weaken in the wake of his babbling though. Other than indicating that last week’s failure to pass the healthcare bill changes nothing for the Fed, he didn’t really say much of anything anyway.
Volume picked up (1 bln on the NYSE and 1.8 bln on the NASDAQ). Breadth was 2 to 1 positive on the NYSE and just shy of 2 to 1 positive on the NASDAQ. New highs edged out new lows on both exchanges (95 to 17 on the NYSE and 114 to 29 on the NASDAQ).
Equities were higher virtually across the board in no particular pattern.
Commodities Were Mixed:
Brent crude rose nearly a percent. Copper rose over a percent. Palladium fell half a percent, and platinum fell over a percent and a half. The CCI equal-weighted commodity index ETF (GCC) fell a freckle.
Gold Slumped As The Dollar Bounced:
April gold slipped about $4 down to $1251 overnight in Asia and began to firm again in Europe to eventually open back near the unchanged mark in the US. Initially, the metal firmed about $3 to $1258 and then slipped once the dollar began to firm with equities, which ended up sending the metal out for the option expiration at $1255.
After the expiration, Fischer began to yap, and when bond yields and the dollar squirted higher following Fischer’s comments, the yellow metal dumped down to as low as $1247 to mark the low for the day. From that low, the metal bounced into the equity close to go out closer to $1250 for a loss of nearly half a percent on a spot basis.
Gold Stocks Were Spanked:
The GDX opened flat and collapsed to a new low for the week and even took out last week’s low before finally bouncing within pennies of its low on Friday the 17th. A bounce appeared into the close to send the GDX out off its worst levels of the day, but it still ended down over 2 and a half percent. Volume also picked up slightly.
Obviously the miners have been flashing warning signs for over two weeks now given their large negative divergence from the metal over that time, and with gold appearing to have now double topped with its February high once again below the 200 dma, the correction that the miners have been signaling could now be upon us.
With the equity market rallying and both the dollar/yen and yields moving higher along with equities, we obviously now have a catalyst for such a correction in the gold complex too.
I’d like to see the metal close below $1250 and the GDX close below 22.50 before declaring the correction to be “on,” but today’s slide certainly makes that close very possible as soon as tomorrow.
The Dollar Bounced:
The dollar bounced vs. other colored paper across the board. The dollar index rose over half a percent.
Treasuries Were Lower:
Treasury yields rose 3 bps in the long end. Yields rose 3 bps in the Fed-sensitive 2yr note to 1.3%. Junk debt was higher, with the HYG picking up over half a percent.
To Sum Things Up:
The S&Ps are only about 2 percent off their recent all-time high. That’s obviously not far to go in order to score a new high, but yields are going to spike as equities rally too. Thus, I’ll be interested to see where those rising yields cause stocks to stumble once again.