A Pretty Weak Oversold Bounce

Equities start the day higher on a pretty weak oversold bounce. 3 whole futures points? That’s it? After being down 10 of the past 13 sessions? Weaksauce. Yesterday felt like the first time markets were nervous about this debt ceiling thing. We have T-bills trading like they sell electric cars (yield chart), the VIX trading like a tech IPO, High beta trading like they pollute rivers (names like LNKD, YELP, TSLA), and bloggers writing about “prioritization” and “super-coupon bonds.” (that last one is kind of fascinating. Technically the Fed could issue t-bonds with a 23% coupon whose price, clearly, would be sky high. The rub is that only the face value would count against the debt ceiling. So price around 275, only 100 counts against it). Other than financial instrument we’re also seeing stress manifest itself in sentiment surveys. Gallup’s Economic Confidence index plunged the most since Lehman yesterday as people begin their retreat to the sidelines. Is it all bad news? Yes, yes it is. Actually wait, no it’s not, it’s only 99% bad. President Obama is going to appoint Janet Yellen to succeed Ben Bernanke. Finally, a clear level headed decision that the market loves, thanks for having our back big guy! Oh and how awesome is this trifecta: Yellen, Merkel, Lagarde. Rest in peace Susan B Anthony and Elizabeth Stanton, the world has done you proud.

After the open it was all ugly all the time as the market could find no solid ground. Continuation of yesterday? Sure. Market finally putting pressure on Washignton? Sure. Will it get worse the more this drags on? Sure (someone used a DEFCON analogy before me, I hate myself). No morning data to speak of so let’s check out some of these equity issue things. So it looks like JOSB wants to buy MW. Man, I don’t know how many suits you’re gonna get for free after this but I bet it will be a LOT! One IPO today, SFXE, a company that promotes EDM concerts! Glow sticks and thumping music, line up the millenials baby! I’ll admit I do like EDM, there are plenty of times I need to dance in the shower and Kaskade gets it done. Company lost 14mm last year on 24mm in revs and launched to a $1B mkt cap! Moving on, YUM was down big citing weakness in China. Guess General Tso must’ve put a whoopin’ on the Colonel. Big winners were scarce (other than men’s habadashers) but there were a few of note. DRI spiked 7% after it was reported Barrington took a stake and might push for a breakup. Separate Olive Garden from Red Lobster? Heresy!! Just don’t touch my endless breadsticks, Anton needs his carbs (I might do a whole recap in 3rd person soon, stay tuned). HPQ is confident of its turnaround (+8%), HIG may be selling a unit (+4%), and T is close to selling off some spectrum (+2%). Have you ever read a wall st recap that worked “habadasher” in? Come on, I’m trying hard here! By lunch we were grinding higher as selling exhaustion finally showed up.

The 2nd half of the day was fairly uneventful and we closed at 1,656, unchanged. If this is the best we can hope for in an oversold market then there’s probably more downside to come. Still, let’s keep things in perspective here, we are only 4.5% off the all-time highs. Will we rally on a deal? Probably, but I’m worried that’s consensus, and we all know what happens to people who follow consensus. That being said I’m not bearish, I will only turn bearish if we break 1,600 so there’s room to churn. We need a deal here people! Let’s get this done! To quote the great Lando Calrissian: “Come on Han old buddy, don’t let me down”. Final Score: Dow +18bps, S&P500 +6bps, Nasdaq -36bps, Rus2k -36bps. 

News Highlights:

We’ll end with another fail video, this time courtesy of Mother Russia! I absolutely love the guy pulling out the plant..easily my favorite part.


Have a good night.