Big Taper, Bad Data, & Buyback Bonanza Sparks Buying Frenzy In Bonds & Stocks

The markets took on a Dickensian dimension this week as while "it was the worst of times (for economic data), it was the best of times (for stocks)"...

The US Macro Surprise Index continued its serial disappointment plunge into the red - the weakest since Feb 2023 (not helped at all by today's payrolls miss)...

Source: Bloomberg

With growth data plunging while inflation data soared...

Source: Bloomberg

Bad news was good news though as the market only had eyes for Powell's big taper and the buyback bonanza (from AAPL and the rest), and today's NFP Goldilocks results (175k vs. 240k expected) as wage softness helps to ease inflation fears.

Small Caps leading the bunch amid a big short-squeeze and S&P lagging (but all green on the week)...

All the majors rallied up to their 50DMAs but were unable to breakout...

Nasdaq performed well with MAG7 stocks wildly choppy, but overall pushing back up towards record highs...

Source: Bloomberg

'Most Shorted' stocks suffered the biggest squeeze in two months (and biggest two-week squeeze since Jan 2023)...

Source: Bloomberg

Of particular note was Utes outperforming (while energy lagged) as the 'Next AI Trade' goes mainstream. Financials were also red on the week...

Source: Bloomberg

Bonds were also bid all week with yields down 12-20bps as the short-end outperformed...

Source: Bloomberg

And 2Y yields at 5.00% were thoroughly rejected as yields plunged today back below pre-CPI spike levels..

Source: Bloomberg

The dollar dropped this week, erasing almost all of the post-CPI gains...

Source: Bloomberg

Gold prices were lower on the week (second week in a row), despite the weak dollar and 'easing' by The Fed...

Source: Bloomberg

Despite a decent bounce back today, bitcoin was down on the week, testing back up to $62,000...

Source: Bloomberg

...after an ugly week of aggregate net outflows from BTC ETFs...

Source: Bloomberg

Oil prices plunged this week - down all five days for the worst in three months - back to near two-month lows...

Source: Bloomberg

And finally, rate-cut expectations have surged this week with 2024 now pricing in two full cuts and 2025 three more cuts...

Source: Bloomberg

Is this what Powell wanted? To ease financial conditions again!?

Tyler Durden Fri, 05/03/2024 - 16:00
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Big Taper, Bad Data, & Buyback Bonanza Sparks Buying Frenzy In Bonds & Stocks

The Permian Shrugs Off Below-Zero Natural Gas Prices In Texas

By Tsvetana Paraskova of OilPrice.com

Permian producers are not shutting in oil wells with associated natural gas despite the fact that the Texas regional gas price has been stuck at below-zero levels since early March.

Major pipeline operators in the Permian basin haven't yet seen any effect of the negative gas prices at the Waha hub in West Texas on activity as producers are look to maximize oil realizations at West Texas Intermediate crude prices at above $80 per barrel.

But the U.S. natural gas benchmark, Henry Hub, has been depressed below $2.00 per million British thermal units (MMBtu) since early February due to weak winter demand amid milder weather, record output at the end of 2023, and higher-than-average natural gas stocks. 

Natural gas prices at the Waha hub slumped to a negative value of -$2.00 per MMBtu in April as the recent rise in oil prices prompted producers to bring drilled but uncompleted wells online. The Waha hub prices remained below zero for most of March and April amid high production and not enough takeaway capacity.

The price at the Waha Hub rose by $1.25 in the latest reporting week, from -$1.18/MMBtu to $0.07/MMBtu on April 24, only the second day the price was above zero since April 1, per EIA data.

The negative Waha gas prices and the supply glut are creating a problem for Permian producers regarding how they should dispose of part of the excess natural gas output.

Takeaway capacity has been constrained in recent weeks due to some maintenance, but more pipelines are set to begin operations in the coming months to potentially alleviate the glut as demand for LNG exports from the U.S. Gulf Coast will continue rising for years to come.

For the time being, the Permian is holding natural gas production relatively steady or slightly lower than at the start of the year, but rigs haven't been dropped in the most prolific U.S. oil basin, unlike in the giant shale gas basins such as Appalachia and the Haynesville in East Texas and Western Louisiana.

"Essentially, you've seen no effect from the weak natural gas prices," Anthony Chovanec, Vice President, Fundamentals and Supply Appraisal at Enterprise Products, said on the pipeline giant's earnings call this week.

"If you look at what drives the economics of the producers in the Permian, it's not natural gas. And, you know, you're -- what we've seen in natural gas prices is not going to cause people to shut in or even throttle back oil-related natural gas at this point," Chovanec told analysts.

"But if you go and look at rig counts in the Permian, since the first of the year, they're as steady as they can be. Actually, the same can be said for the Eagle Ford. You see rig counts down in the Haynesville and you see them down somewhat in Appalachia, but not in your oil rig basins."

In the oil rig basins, producers aren't rushing to boost oil production at above-$80 WTI crude prices, partly due to the weak natural gas prices. But they aren't scaling back production, either, as they are keen to continue pumping oil and the associated natural gas that goes with it.

Some oil and gas producers in Texas have significantly increased in recent weeks the number of requests to the Railroad Commission of Texas (RRC) to allow flaring on some operations as low natural gas prices and a glut of supply present challenges to the drillers how to get rid of the unwanted gas. RRC, the oil and gas industry regulator of Texas, approved last week as many as 21 requests from producers to be exempt from rules banning or limiting flaring, Reuters reported on Tuesday.

Midstream infrastructure company MPLX expects additional takeaway capacity out of the Permian, apart from the Matterhorn pipeline expected to enter into service in the third quarter this year, MPLX's top executives said on the earnings call this week.

"There's going to be more takeaway out of the basin," MPLX chief executive Michael Hennigan said.

LNG exports out of the Gulf Coast will be a major pull for natural gas produced in the Permian, MPLX's senior vice president David Heppner added.

"You've got the pull coming from these LNG facilities down in the Gulf Coast, which are majority of them backstopped by 20-year take or pays, which is a nice long-term pull," Heppner said, adding that "there is incremental capacity needed clearly with barrels out of the Permian to the Gulf Coast."

Tyler Durden Thu, 05/02/2024 - 14:55
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The Permian Shrugs Off Below-Zero Natural Gas Prices In Texas

Taper 'Tantrum-ette' - Stocks Pump'n'Dump As Fed 'Eases' Balance-Sheet Pressure

Powell to traders today...

h/t @ForexLive

The bigger than expected QT taper announcement juiced markets (stocks and bond prices up, dollar down) into Powell's press conference, then got spooked lower as he admitted "inflation has shown a lack of further progress... and gaining confidence to cut will take longer than thought."

But that dip didn't last long and yields puked, stocks soared, gold rallied and the dollar puked...

Source: Bloomberg

The market shrugged off Powell's comments about "whether rates are at their peak will depend on data" which opened up the path of possible rate-hikes, but he dd add that "he doubts next move will be a hike."

CNBC's Steve Liesman asked the big question that everyone should be asking: you are 'sort of easing' by reducing QT while holding rates flat because you're not confident that inflation is under control - wassup with dat?

Powell replied with some words that meant nothing, stating that they have long planned on tapering QT and claimed that 'reduction in balance sheet run-off is not policy-easing'.

"This is not the easing you're looking for..."

By the close, all of Powell's pig-kissing lipstick had been wiped off (see below for the coordinated crypto/nasdaq take-down) as stocks saw solid gains erased in the hour after Powell stopped speaking... Small Caps and The Dow managed to hold on to the gains but Nasdaq and S&P closed nearer the day's lows...

'Most Shorted' stocks saw a massive squeeze (+5%) on the FOMC headlines, before the late day selling pressure hit...

Source: Bloomberg

MAG7 stocks ended the day unchanged after giving back their post-Powell gains...

Source: Bloomberg

Treasury yields plunged 6-8bps across the curve on the day, with the short-end outperforming, dragging all yields lower on the week...

Source: Bloomberg

The 2Y Yield snapped back below 5.00% once again...

Source: Bloomberg

The yield curve (2s30s) jerked flatter initially, then steepened dramatically back to flat on the week...

Source: Bloomberg

The dollar tumbled on the non-easing 'easing' (but bounced back a bit after Powell finished speaking)...

Source: Bloomberg

Gold surged back above $2300 on the non-easing...

Source: Bloomberg

Bitcoin bounced back on the FOMC statement, recovering some of last night's bloodbathery, but somebody did not want it back to $60,000 and that smackdown dragged stocks down with it...

Source: Bloomberg

Oil prices ignored all the fuss around The Fed and fell for the third day in a row (its biggest daily drop since early Jan) with WTI back below $80 at six-week lows...

Source: Bloomberg

Finally, rate-cut expectations (hawkishly) rose on the day with one-or-two cuts in 2024 now 50-50 and two-or-three cuts more in 2025 around 50-50 also...

Source: Bloomberg

And, also Powell explained that he "doesn't see the stag or the 'flation" in markets... well this should help Jay...

Source: Bloomberg

We can't help but feel like Powell is awfully eager to 'loosen' policy... but he made it clear that the 2024 election "just isn't a part of the Fed's thinking."

So, that's that then!

Tyler Durden Wed, 05/01/2024 - 16:00
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Taper 'Tantrum-ette' - Stocks Pump'n'Dump As Fed 'Eases' Balance-Sheet Pressure

Gold Flowers Amid April 'Stagflation' Showers; Stocks, Bonds, & Crypto Crushed

The final day of April was really ugly: ECI way hotter than expected (spooked markets), Case-Shiller home prices soared far more than expected (spooked markets more), Chicago PMI puked (while prices paid increased), Consumer Confidence crashed, and Dallas Fed Services slumped... all of which left stocks, bonds, gold, crude oil, and bitcoin all languishing into month-end while the dollar rallied.

Stocks puked into the month-end close today ahead of AMZN earnings...

April was a disaster from a macro perspective...

Source: Bloomberg

...with soft survey data collapsing while 'hard' data limped modestly higher...

Source: Bloomberg

...and worse still growth surprises slumped as inflation surprises soared - screaming stagflation so loud no one could ignore it...

Source: Bloomberg

Against the backdrop of US 10Y yields up ~45 bps in the month of April...

Source: Bloomberg

... and the market taking another rate-cut off the board...

Source: Bloomberg

...price action in April is perhaps not overly surprising with Equities broadly lower, albeit, with NDX / Quality / Mag7 continuing to outperform.

Source: Bloomberg

Goldman's Peter Callahan notes that since 2006, the S&P 500 has fallen by an avg of 4% when real yields rose by more than 2 stdev in a month.

April was the first down-month for stocks since The Fed Pivot (Oct 2023). This was the worst month for The Dow since Sept 2022. Nasdaq suffered its worst month since Sept 2023.

Interestingly, while US majors and sectors were red (broadly speaking) in April, Chinese Internet stocks soared back to life (+9.5% vs US MegaCap -2%)...

Source: Bloomberg

Sectors were very mixed in April with Energy and Utilities outperforming (the latter on AI energy use, since its typical relationship to rates decoupled) and Real Estate lagged (along with Tech)...

Source: Bloomberg

The basket of Magnificent 7 stocks saw red in April for its first monthly loss since October and worst monthly loss since September. The last week has been tempestuous to say the least as TSLA (win), META (lose), MSFT and GOOGL (win) all hit...

Source: Bloomberg

Still, stocks have a long way to catch down to the new reality priced into the short-end of the bond market...

Source: Bloomberg

As we noted above, the TSY curve was up relatively uniformly on the month, but perhaps most notably was the 2Y yield which tested 5.00% numerous times and broke out today...

Source: Bloomberg

One more notable event in April was the tightening of financial conditions (admittedly only marginally), but definitely more what The Fed wants relative to the extreme 'easiness' that had been priced in after Powell's pivot...

Source: Bloomberg

The dollar rallied for the fourth month in a row with the big gains coming mid-month....

Source: Bloomberg

Despite taking a battering today, Gold managed solid gains on the month, topping $2400 at its record highs...

Source: Bloomberg

Oil prices ended the month marginally lower, thanks to today's selloff...

Source: Bloomberg

Copper was the outstanding commodity in April, soaring around 14% to two year highs with practically no drawdown as the reflation trade came back to life (on the back of AI demand)...

Source: Bloomberg

Bitcoin had an ugly month, down 15% after seven straight months of gains...

Source: Bloomberg

As BTC ETF flows started to ebb  - Net Flows (including GBTC): April -$183mm, March +$4.62bn, February +$6.03bn, January +1.47bn...

Source: Bloomberg

Finally, the ultimate analog remains in play...

Source: Bloomberg

...with NVDA bouncing back, just like CSCO did.

And bear in mind, as Goldman's Peter Oppenheimer points out, US equity market valuation is currently at an extreme level relative to history...

...also a condition that typically means higher rates weigh more heavily on stocks.

And while April showers are over...

The S&P 500's vol term structure suggests the storm is not over yet.

 

Tyler Durden Tue, 04/30/2024 - 16:00
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Gold Flowers Amid April 'Stagflation' Showers; Stocks, Bonds, & Crypto Crushed