With many international markets closed, trading volumes are muted (total shares traded across all US exchanges are -35% vs 20dma) and liquidity is non-existent (S&P Emini top of book depth now back below $2mm vs historical avg of $13mm although above last week's record low sub-$1mm), but ETFs (a proxy for shorting activity) currently 34% of total tape vs 28% historical avg. 

As Goldman's top trader John Flood write in his mid-day note, "a downweight of investment allocations to the US price action is palpable as USD and UST getting hit which is applying continued pressure on the US stock market." Sure enough, as discussed last night, the USD has plunged to a four year low.

As for the catalyst for today's selling, Flood echoes what we already noted, namely that market is uncomfortable with the current dynamic between White House and Fed (read latest here). It's also noteworthy that according to the Goldman Prime Brokerage data, last week showed the most notional short covering across the globe since July 2024.