Recap : Drive-by


What happened today? There isn’t really a good answer. (That I know of, anyway) I think a lot of market movements are just noise, but big moves like today usually have some sort of catalyst. But there wasn’t an obvious one today. The China trade data was weak, but it is a long stretch to make a fundamental case that this noisy data series is likely to drive weaker US corporate fundamentals. Jobless claims were strong, hitting the lowest level since May 2007.

One possibility (h/t JL) is that people are selling ahead of earnings season, which is kicking off. In addition, we are approaching the seasonally weak period. (Sell in May and go away, etc) People may be jumping the gun there. Further position unwinds by equity hedge funds were likely a contributory factor, given that the Nasdaq Composite underperformed by ~1% today.

Another possibility is that the equity market is reacting to declining growth expectations. There has been some commentary on the decrease of potential growth by the Fed recently, and the 30y real yield, a market proxy for potential growth expectations, declined sharply today and is now at the lower boundary of a range that has persisted since July:

This may be relevant because 30y real yields have (possibly spuriously) been leading equities by ~2 hours over the past several days. Perhaps there are some large asset switch flows happening:

Whatever the reason, equities are in a tough spot technically. Having broken and closed below the 1840 level that has held for a month and a half, shorts are likely to press further here, although whether we get a real breakdown or a head fake (like the upside break earlier this month) remains to be seen:


  • US Jobless Claims declined to 300k vs 320k exp and 326k prev
  • Australia posted a strong employment report with 18.1k finding work versus 2.5k expected. The participation rate declined to 64.7% from 64.9% which impacted the unemployment rate. It declined to 5.8% (vs 6.1% expected) from 6.1%. The employment mix was strong with 40.2k finding full time work and -22.1k leaving part time jobs.
  • China’s trade balance swung to a surplus of $7.71bn versus $1.80bn expected. The move was from a deficit of $22.99bn last month. Exports dropped -6.6% y/y versus +4.8% expected. Imports -11.3% versus +3.9% expected. The data partially reflected the over-invoicing / fake exports problem from this time last year, but not all of the drop can be explained away..

Upcoming Data:

  • Fri: TurkeyCurrent Account, US PPI,
  • Mon: US Retail sales, RBA Minutes
  • Tue: UK CPI, GermanyZEW, US Empire Mfg, CPI, NAHB Survey, NZ CPI, China GDP
  • Wed: UK Employment, US Housing Starts, BoC, Yellen Speaks, Kuroda Speaks
  • Thu: Canada CPI, Jobless Claims, Philly Fed,