Americans Continue To Find Jobs

Equities start the day lower as Americans continue to find jobs. Yep, once again we are in the awesome position of rooting for bad economic data if you are long the market. Wait…it’s not Friday…what are you talking about Michael? Well my friends Weekly /Continuing Claims was out this morning and both showed the same trend we’ve seen for years now: a strong labor market here in the US of A. In fact, Weekly unemployment claims is at its lowest level since April 2000! I think we can all agree that less people filing unemployment claims is universally a good thing.  You know what else? Wages grew 2.6% in Q1 (YoY basis). Jobs and Wages…Wages and Jobs….are we nearing escape velocity? Honestly it’s hard to know because every time we thought we were, we weren’t. Fool me once…shame on….wait I just used this joke didn’t I. Anyway, futures sold off and 10yr yields have shot up 18bps since Tuesday (you want a real eye opener? Look at German Bund yields. Doubled in a few days! Doubled! I’m not a fixed income guy but do Sovereign bond yields double all that often? Ex a crisis?) Sentiment numbers come out on Thursday’s too and the AAII survey showed a measly 30% bulls, the 8th straight week where it’s been below its bull market avg of 38%. So let me get this straight: individuals aren’t all that bullish yet people are finding jobs and wages are ticking higher. Yep, the song remains the same.

After the open it was nothing but follow thru selling from yesterday. The same exact stuff was being pitched: Biotech / Regular Tech / Small caps and the same exact stuff was being bought: Energy (how odd is it to hear that lately) and all the currencies against the Dollar. King Dollar is having a bad few weeks right? So we wonder…has the “strong dollar” trend run out of steam? Maybe, maybe not. Steve Holt, our Head of London Sales, put together this awesome chart showing the Trade Weighted Dollar for the past few decades. This thing turns like an aircraft carrier, slowly, but when the trend changes it’s usually meaningful and sticks with us for a long time. As Davinci said:  “simplicity is the ultimate sophistication”. It looks like the primary trend has changed, there may be dips/pullbacks but the trend is dollar strength. AAPL ended up getting smacked today, I mean when you report a blowout record quarter you gotta expect your stock to fall 6.5% over the next few sessions (I get it, it was an insanely crowded trade. Had to poke fun). Other losers:  HAR, VAR, ZMH, ADSK, CRM ( were just up huge!!), and YELP (at one point Yelp had a $6B mkt cap.  now its 3). Winners, like I said earlier, were once again Energy names:  DO / CHK / CNX / RIG / NE…names I’ve spoken of almost daily for the past few weeks. Ugly ugly all morning long, but I’d like to point out that the end of the month has been bad for equities for awhile now. Mar 31, Feb 27, Jan 30, Dec 30, Nov 28….all down days for SPX. Weird right? 

The last few hours were pain mixed with agony and we closed at 2,085, down 1%. Here is what I think is happening my friends, lend me your ears for one final minute. I think we are seeing some kind of Great Unwind. Now when I say “Great Unwind” I don’t mean some all arcing permanent change to the way people are positioned. I just mean a reduction in what people were holding. Markets like to punish the most people they can at one time right? We can agree that usually happens? What are all the crowded trades? 1) Long USD / Treasuries 2) Long European Debt (Bunds for example)  3) Short Energy  4) Long Europe Indices (like DAX)  5) Long Biotech  6) Long SPX 7) Long AAPL  8) Short the Euro  9) long Domestically focused equities  i.e. small caps I could keep going here but I think you get my point. All of those have reversed over the past few days, some in large ways. It’s late April and the market decided to see who was too far over their skis.  I might be wrong about that but with so much going haywire right now it’s best explained with an unwind theory. People like to protect their profits, that is a thing right? Ok let’s talk more tmmrw, this is getting too long and I can hear the “delete” buttons being hit.  

Final Score:  Dow -108bps, S&P%00 -101bps, Nasdaq -164bps, Rus2k -215bps. 

News Highlights:

We’ll end tonight with the luckiest guy in the world.   How awesome is that guy’s story going to be to his boys?  He’ll act like he was Superman right?  I bet the embellishment will be off the charts.  Actually, can you even embellish surviving that?

Have a good night.