Surge in Oil, Gold, and Bonds Triggered by Strikes; Big-Tech and Bitcoin Take a Hit

Overview

Today's economic landscape presents a mixed picture, with construction spending down, National Manufacturing surveys and Dallas Fed in contraction, but an unexpected surge in JOLTS. However, this was overshadowed by strikes, both from Iranian missiles and American dockworkers.

As the deadline for a widespread union strike passed, bond markets saw a drop in yield. This was followed by a downpour of Iranian missiles on Israel, prompting investors to turn to safe havens such as bonds and gold, while stocks were sold off as oil prices experienced a resurgence due to geopolitical risk premium.

Treasury Yields and Gold

Today, treasury yields were bid, but have shown mixed performance over the week, with the short-end significantly underperforming. Gold also saw a surge as a safe haven, erasing all of the previous day's losses.

Dollar Strength and Oil Prices

The dollar saw a significant strengthening, possibly due to more safe haven flows. Oil prices also saw a sharp increase following the missile launches, with WTI reaching almost $72 before retracting slightly.

Stocks and Bitcoin

Stocks, led by Small Caps and Mega-Cap Tech, took a hit following the Iran-Israel headlines. However, after Europe closed, the algos attempted to buy the dip. This ignited some momentum, but failed to turn any of the majors green before some late-day profit-taking dragged everything down again.

Both VIX and VVIX saw a sharp increase today. Bitcoin, serving its role as an anti-geopolitical risk asset, took a hit every time a Middle East headline hit the Bloomberg terminal, which seems counterintuitive.

Earnings Momentum

As reported by Bloomberg, while investors are focused on policy cues and liquidity infusions, earnings momentum has turned negative and could potentially drag stocks down if it doesn't improve with the upcoming earnings season.

However, for now, liquidity seems to be all that matters, until it doesn't. Some liquidity stress has been observed in the banks' plumbing, which is a situation to keep an eye on. This might be why USA Sovereign risk is also spiking.

Bottom Line

Today's economic landscape is a mixed bag, with various factors influencing the markets. Strikes have led to a surge in oil, gold, and bonds, while big-tech and Bitcoin have taken a hit. The situation is fluid and warrants close monitoring. What are your thoughts on these developments? Share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is every day at 6pm.