Stocks Spooked, Yields Collapse On Market Selloff
By now the stock market selloff is old news. The good news is that bond yields (NYSEARCA:TLT) had a reprieve overnight as panic out of equities climaxed. Starting at 1:45pm yesterday just under 3 hours before market close, Treasury yields began to fall, reaching lows of 3.142% as traders turned to debt markets as a safe haven. Gold (NYSEARCA:GLD) also held up well in the midst of the panic, with gold stocks (NYSEARCA:GDX) closing near their highs of the day, up 1.3%. Junior miners (NYSEARCA:GDXJ) also ended higher after dipping earlier in the day in what also looked like a flight to safety, though gold stocks have not exactly been safe this year. Gold has broken back through the $1,200 level overnight. Overall yesterday, stocks, bonds, and the dollar all fell, and gold was up, a relatively rare combination.
It’s Crunch Time For Tesla
Tesla (NASDAQ:TSLA) has 143 days to come up with enough cash to pay off billions in debt. Usually that would be considered fine, because everyone has been buying bonds and rolling over bonds and throwing money at people for years, but recent action in debt and equity markets could raise some questions regarding how much money investors may or may not be willing to fork over in 143 days’ time. That would bring us to March, and the way stocks are trading now, anything could happen by then. Tesla has been hitting its production targets of late and will have to keep hitting them consistently in order to give the markets the confidence that Tesla isn’t just a money pit filled with pretty car parts it can’t put together fast enough. Tesla share held up well yesterday considering the carnage, down just over 2.5%.
Asia Panic Even Worse Than Wall Street, Cryptos Crushed
Asian stock indexes are running for their lives this morning with Shanghai leading the way. The SSE Composite Index is down a whopping 6%, followed by the Hang Seng in Hong Kong, down 4%, and Japan’s Nikkei, down 3.9%. It’s looking bloody out there. The Yuan has hit new lows against the US dollar at 6.93, though the Japanese Yen is showing stability. Emerging market currencies are actually performing quite well against the dollar during this selloff, with the Turkish Lira up over 1% to nearly 6, the South African Rand up half a percent, the Brazilian Real stable, the Russian Ruble not moving much, and the Argentine Peso also sticking right where it is.
Meanwhile, cryptocurrencies are down double digits in a broad selloff. No safe haven there either.
Trump Likes the Fed Fast and Loose, Thinks They’re Crazy, Inflation On Deck
An effective federal funds rate of 2.18% is just too tight for The President The Donald. He was widely quoted across financial news media as saying that the Federal Reserve has “gone crazy”. Well, if so perhaps he should end their monopoly over interest rates and have the market set them as the market sets nearly every other price of anything, rather than a group of PhDs who keep getting things wrong. Inflation numbers in the CPI are due today at 8:30am, and those are the ones that will likely guide the Fed rather than some verbal mischief from Trump. The Core CPI is expected to come in at 2.3% year over year, and the full CPI at 2.4%. If they come in any higher, the bond market could continue its dive, with stocks following.
Financials Crushed, FAANGS Defaanged
In somewhat of a more worrying signal, financial stocks were crushed to 52 week lows in many cases. Goldman Sachs (NYSE:GS) is at new 52 weeks lows, as is Morgan Stanley (NYSE:MS). Netflix (NASDAQ:NFLX), the darling of darlings during this 10 year old bull market, was down 8.4%, Amazon (NASDAQ:AMZN) is now down 15% from its highs, nearly in a bear market, technically speaking.