Stocks & Bonds Sold Ahead Of Fed Decision; Crypto & Crude Surge

Hot retail sales print and better than expected Industrial production data are not exactly what the doves wanted to see ahead of tomorrow's big decision (25 or 50bps). Does this look like an economy that needs rate-cuts?

Source: Bloomberg

To complicate things further for traders, NikiLeaks (WSJ's Nick Timiraos) said withholding a larger cut could raise awkward questions (and Goldman's trading desk reminded that going back to Bernanke, the Fed typically delivers close to what the market is pricing in)... which is currently around 42bps of cuts tomorrow (70% odds of 50bps cut)...

Source: Bloomberg

Trading was 'squeezy' out of the gate with Small Caps soaring on the back of "most shorted" stocks. But that faded around the European close and 'most shorted' fell back to unchanged...

Source: Bloomberg

A similar picture occurred for Mag7 stocks, a big gap-up open quickly reverted lower, back to unchanged...

Source: Bloomberg

Goldman's trading desk noted that volumes were muted and S&P top of book (liquidity) tracking significantly lower as most investors in wait and see mode.

HFs much better for sale, selling macro products (short ratios elevated to 75%) .
LOs are much better buys, though activity very light, with buy skews across macros, discretionary, and tech.

By the close, only Small Caps held on to gains with the rest of the majors all languishing around unchanged...

Stocks and bonds remain in their own worlds... for now...

Source: Bloomberg

Treasury yields were higher on the day with the short-end lagging (2Y +4bps, 30Y +2bps). That left the long-end still lower in yield on the week, but the rest of the curve higher in yield...