(Bloomberg) -- S&P Futures are down ~16 to 2,679, what some may call a healthy pullback given the melt-up into the prior close, but anxiety remains heightened over the recent meltdown/“flash crash”/whatever you want to call it. The VIX is holding steady around 30 while 10-year yields couldn't break above 2.80% overnight and Bitcoin continues to bounce, now back above $8,000.
Fed's Kaplan, whose hawkish comments spooked the market Friday, in a speech today called the market correction and volatility "healthy." This follows Bullard yesterday talking down the potential of four rate hikes this year, though not surprising given he is among the more dovish officials. We still have Dudley, Evans and Williams on tap to opine later today.
A bit of weirdness to the numerics of yesterday's action, with the Dow sinking off the open to down 567 only to end up 567 on the day (at least neither number was 666). But relatively speaking, things saw some hints of normality, disregarding the first ~25 minutes of trading where it initially seemed like every bid in sight lifted and sell programs went into overdrive, only to immediately reverse in violent fashion. And of course, nothing is normal about a trough-to-peak intraday move of more than 100 handles on the S&P.
But the hints showed up later in the session, with tech reverting back to a leader in the market rally, the 10-year yield steady-ish around 2.76%, the VIX falling back to somewhat respectable levels after briefly flirting with 50, and no exchange-traded products disintegrating in fabulous fashion after the bell.
Tech's rally (S5INFT +2.8% vs S&P 500 +1.7%) can be attributed to MU surging over 11% on a forecast boost, chip name SWKS up 10% on results, Nvidia's near-6% bounce (reports Thursday night), Apple up >4% and best performer in Dow this week, and a rip in the opticals after FN and OCLR earnings. Meanwhile the heavily shorted SNAP exploded higher by more than 20% last night on earnings (four upgrades so far this morning).
The yield-sensitive sectors, namely utilities and REITs, traded in the red with the bounce in rates, all normal things that we've seen so far in 2018 until the recent meltdown. Energy continues to underperform with no let-up in crude's decline; meanwhile XOM (down 1.7% and the worst performer in the DJIA) and CVX (up 4.1% after an upgrade) diverged after two days of declining in tandem since disappointing earnings. Weakest link in the S&P 500 by far was CBOE, which tanked more than 10% for its biggest move on record on worries over future VIX volumes after the short vol trade blowups.
What's the trade?
- Earnings before the open: ICE (would they comments on VIX ETN mess?), KORS (just now boosted rev. forecast after TPR's beat), HAS (recent MAT deal spec), HAIN (recent takeout spec), HUM (Amazon venture concerns), GGP (Brookfield deal concerns), and coal major BTU
- Earnings after the bell: TSLA (Model 3 deliveries in focus again), FOXA (all sorts of M&A spec + that $3b NFL deal), TTWO (recently sold off on Red Dead delay), SYNA (optimism after CES on new sensor), IPHI (optical name ripped off peer results), NXPI (given Qualcomm deal), XPO (recent takeout spec), ZNGA (options imply 13% move), and YELP (options imply 18% move)
- Aerospace & defense stocks in focus as the Cowen two-day conference kicks off; names presenting today include BA, NOC, and JCI
- Retail sales will start hitting tonight, beginning with Costco, while tomorrow brings LB (worst performer in S&P 500 YTD), URBN, BKE and more
To contact the reporter on this story: Arie Shapira in New York at ashapira3@bloomberg.net.
To contact the editors responsible for this story: Chris Nagi at chrisnagi@bloomberg.net, Joanna Ossinger
©2018 Bloomberg L.P.
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