Less Jobs, More Inflation: Stocks Puke, Oil Soars, Yield Curve Steepens

Less jobs, slower Services and Manufacturing sector growth, sticky prices (ISM), and surging gasoline costs (thank you OPEC) – Bidenomics smells more like stagflation.

‘Hope’ has been in charge of macro data recently with ‘soft’ survey data surging back in its mean-reverting manner as ‘hard’ real data has been fading (led down by industrial, personal finance, and housing data)…

Source: Bloomberg

After a bloodbath in bond-land this week, today’s ugly jobs data sparked a bond-buying-panic (the belly outperformed today 5Y -15bps), sending yields at the shorter-end of the curve lower on the week (-10bps), though the long-end was still up around 20bps on the week…

 

Source: Bloomberg

No-one should be surprised by this purge in yields…

What can possibly go wrong by shorting TSYs pic.twitter.com/qbUXmYN9Mu

— zerohedge (@zerohedge) August 3, 2023

Rate-hike expectations tumbled…

Source: Bloomberg

On the stock side, AMZN and AAPL were the big movers (the former surging most since Nov as the latter tumbled by the most this year)…

 

Overall, they lost around $30 billion in market cap today…

Source: Bloomberg

That weighed on Nasdaq which was the week’s worst performer – its worst week since March. The Dow managed a bounce today – perfectly tagging unch for the week – before it all fell apart…

It seems Goldman’s Scott Rubner was on to something when he warned “fade the green” as stocks bounced this morning.

Options traders aggressively faded the bounce post-payrolls in stocks then they piled on as the S&P broke 4500…

Source: SpotGamma

The S&P plunged to 3-week lows…

None of which should have been a surprise given our warning.

‘Most Shorted’ stocks tumbled on the week – the first losing week in the last six…

Source: Bloomberg

VIX (and VVIX) were both higher on the week with significant volatility…

Source: Bloomberg

Back to bonds, the yield curve surged this week (2s30s steeper for the 9th straight day). Outside of the SVB collapse, the last two weeks have seen the biggest curve-steepening since April 2022…

Source: Bloomberg

Yields reversed at key resistance levels from last November (or March’s SVB collapse)…

Source: Bloomberg

The dollar rallied for the 3rd straight week, though today’s dovishness took some of the lipstick off. The reversal in the USD happened right at the pre-Payrolls dump level from July…

Source: Bloomberg

Crypto continues to tread water with BTC hovering around $29k (after tagging $30k intraday during the week)

Source: Bloomberg

Gold rallied on the day as the dollar sank but overall was lower for the second week in a row. Today’s post-payrolls jump echoed last month’s…

Oil prices surged to $83 (WTI) today after the OPEC+ panel’s recc and are up for the sixth straight week (longest streak since June 2022)…

…with WTI at its highest since November…

Source: Bloomberg

Which is a very bad thing for those who believed The Fed has beaten inflation – Pump prices are about to explode…

Source: Bloomberg

And this time Biden is out of options with the SPR… maybe time for another fist-bump?

Finally, you are here…

Source: Bloomberg

And, as Goldman notes, companies that are beating consensus ests by >1SD are only outperforming the S&P 500 by +70bps on the trading session directly following earnings. Typically beats outperform the S&P 500 by over 100bps.

In other words, it’s all priced-in.