Doug Noland: The Wrath

This is a syndicated repost courtesy of Credit Bubble Bulletin. To view original, click here. Reposted with permission.
It’s not the first time that a non-farm payrolls rally wiped away inklings of market anxiety. Coming early in the month – and on Fridays – the jobs report typically makes for interesting trading dynamics. By the end of another interesting week, the timely reemergence of ‘goldilocks’ along with Trump The Deregulator were propelling stocks higher. Long forgotten were Monday’s ‘Stocks Fall Most in Month…’ and ‘Trump Rally Hits Speed Bump on Immigration Concern.’ Indeed, markets were grateful to let a number of developments slip from memory.
It’s still worth mentioning a few indicators that were beginning to lean away from ‘Risk On’. Prior to Friday’s jump, the powerful bank stock rally had stalled. The BKX was down almost 2% from Thursday to Thursday (Italian banks down 3.4% this week and Japanese banks 2.9%). Small cap stocks have underperformed, with the Russell 2000 down slightly y-t-d as of Thursday’s close. Many ‘Trump Rally’ stocks and trades have recently underperform. Equity fund flows were negative for three straight weeks. In high-yield debt, the rally had similarly lost momentum. Also noteworthy, Treasuries rallied only tepidly on Monday’s equity market selloff. European bonds continue to trade poorly (Greek yields up 33 bps; French spreads to bunds widened another 10bps). This week saw bullion jump $29. The dollar Index is now down 2.5% y-t-d.

This post was published at Wall Street Examiner by Doug Noland ‘ February 4, 2017.