IVOV - Weekly Commentary: Opposite Day
2024-04-27 04:30:27 ET
Summary
- The Semiconductor Index surged 9.9%, more than recovering from last week's 9.2% drubbing.
- The earnings picture was mixed. Alphabet and Microsoft, of course, knocked it out of the park.
- The Bank of Japan just can't stop playing with fire. Rates were held unchanged at zero to 0.1% at its Friday policy meeting.
So much for "risk off," at least for this week. The Semiconductor Index surged 9.9%, more than recovering from last week's 9.2% drubbing. The Nasdaq100 jumped 4.0%, getting back much of last week's 5.4% loss. After dropping 13.6%, Nvidia this week surged 15.1%. Not for the faint of heart. Bloomberg: "'AI Craze' Powers Best Week in 2024 for Stocks." Also from Bloomberg: "Wall Street Humbled as Fast-Reversing Markets Confound the Pros."
Did we learn much this week? The bulls have plenty of fight. We would expect nothing less, especially at this point in the cycle. Short squeezes are alive and well. Elon Musk will pick his spots to partake in a favorite pastime: punishing the shorts. Tesla surged 14.4% this week, as market-pleasing talk eclipsed fundamental deterioration. The Goldman Sachs short index jumped 4.3% this week.
The earnings picture was mixed. Alphabet/Google and Microsoft, of course, knocked it out of the park. Things were less than convincing elsewhere. Meta was hit for 7.9%, with the market signaling notable newfound skepticism with the whole AI thing. Intel's earnings miss (stock down 6.8% this week) was another important indication that all is not well in the semiconductor space, AI boom notwithstanding.
But the bulls wrested back control. The VIX (equities volatility) Index dropped 3.7 points to 15.0. CDS prices reversed sharply lower. After surging 49 bps in four weeks, high yield CDS sank 22 this week to 347 bps. Bank CDS reversed lower. JPMorgan CDS declined three to 46 bps - following a two-week 10 bps surge. European bank CDS more than reversed two weeks of gains.
The equities rally didn't give fragile global bonds the warm and fuzzies. Neither did U.S. price data (i.e., 3.7% Q1 Core PCE, 3.1% Q1 GDP Price Index, 2.8% y-o-y March monthly Core PCE…). Ten-year Treasury yields added another four bps to 4.66%, trading this week to a six-month high. German bund yields gained eight bps to 2.58%, rising to highs since November. Also trading to six-month highs, UK gilt yields jumped nine bps to 4.32%. Australian 10-year yields surged 27 bps to 4.52%, with New Zealand yields up 19 bps to 4.98%. Japanese JGB yields added four bps to 0.88%.
The Bank of Japan (BOJ) just can't stop playing with fire. Rates were held unchanged at zero to 0.1% at its Friday policy meeting. The BOJ also stuck with its bond-buying program, pushing out the anticipated shift to QT. The bank was again compelled to reiterate that conditions would remain easy. Meanwhile, the BOJ boosted its forecast of core CPI for the year from 2.4% to 2.8%. Governor Kazuo Ueda conveyed little concern for yen weakness, while downplaying its inflationary impact....
Weekly Commentary: Opposite Day