The Chinese equity market fell over half a percent overnight. Hong Kong fell a hair, and Japan fell over half a percent. JGB yields were unch at 4 bps above the BOJ’s target of zero.
European equity markets were up a touch this morning. Meanwhile, German government 10yr yields fell 3 bps to 0.57%.
Over in the US, the equity futures were up a touch ahead of the open. The dollar was weaker vs. other colored paper overnight but then began to rally strongly as we approached the US equity open for no apparent reason. Gold had been up about $6 but then collapsed as the dollar began to rally. Meanwhile, bond yields were higher.
We opened up a touch in the S&Ps and after rallying a little further, we rolled over and began a slow and steady drift lower that would last for the remainder of the session.
For the close, the S&Ps would go out just off their lows of the session with a loss of a touch.
Volume picked up for the quad witch expiration (2.5 bln on the NYSE and 3.1 bln on the NASDAQ). Breadth was nearly 2 to 1 positive on both exchanges. New lows edged out new highs on the NYSE (90 to 40), while new highs edged out new lows on the NASDAQ (112 to 41).
Stocks Were Higher:
Stocks were mostly higher, although tech was curiously heavy, with the NDX being the sole major index to lose a touch on the day.
Commodities Were Mixed:
Brent crude popped nearly 2 percent. Copper fell half a percent. Palladium rose half a percent, and platinum fell half a percent. Silver fell a third of a percent. The CCI equal-weighted commodity index ETF (GCC) fell a touch to a new low for the month.
April gold rallied almost six bucks overnight to as high as $1322 as the dollar weakened, but after hitting a high shortly before the US open, the metal was seal clubbed as the dollar index squirted higher suddenly for no apparent reason.
From there, the metal would proceed to collapse to a new low for the week and to as low as $1309 before bouncing back up to around $1314, where the metal would chop sideways for the remainder of the equity session to go out with a loss of just a touch on a spot basis.
Gold Stocks Slipped:
The GDX opened a little lower and plunged with the metal to a new low for the month and briefly even went negative on the month before rebounding with the metal. Unlike the metal, the GDX did briefly go positive on the day, but it couldn’t hold on to its gains and ended down just a hair. Volume was once again extremely light despite the GDX rebalancing and the quarterly option expiration that took place today.
Here again, it seems gold’s near term fortunes are once again tied firmly to the dollar index. Where it goes, the yellow metal will follow (in the opposite direction).
Next week we’ll get our next rate hike from the Fed, but the focus will no doubt be on the dot plot, as to whether the Fed signals three hikes this year or four (not that they will likely get to do either if stocks roll over again). After rallying two days after a small move lower on the first rate hike in December of 2015, gold and gold stocks have rallied on two of the past four rate hikes by literally taking off the very same day as the hike. Will history repeat? I worry the setup is a little different this time than those two instances where things turned out positive, but we’ll see how things set up early next week.
The Dollar Was Firmer:
The dollar was firmer vs. other colored paper for no particular reason. The dollar index rose a hair
Treasury Yields Were Little Changed:
Treasury yields rose 2 bps in the long end, leaving the 10yr at 2.85%. Yields in the Fed sensitive 2yr rose 3 bps to 2.31% and a new 52-week high. Junk debt was firmer, with the HYG picking up a touch.
To Sum Things Up:
The S&Ps received a reprieve today, but let’s see how they handle the FOMC next week.