And just to make sure everyone leaves today's market action even more utterly confused, here is the perspective of GS' Robert Savage.
As rallies come and go the market mavens are likely to spend much time trying to explain away the difference. Today’s difference was doubts about banks. The Citibank and Bank of American earnings were better than expected but not enough to convince the market that the upcoming stress tests won’t be a problem. This week will bring a culmination of the FED defense that its tests have real information and the public will be given different arguments for releasing the scores. As the debate grows so will the politics. Differentiation in financials has already occurred and the hope that the entire sector would rise is now being rethought. But this focus on banks misses a larger story today – namely that global growth is in doubt even as the Baltic Freight Index hits a new monthly high. Why? Oil is down over $4, stocks are down over 3% and the data ahead is all tilted towards Europe even as the ECB talks down expectations for more radical reaction to the struggling economy. The central banks on hold theme grows and is a key focus. The BOC decision tomorrow will be important just as the Riksbank will be very early tomorrow. The fate of global growth remains in doubt as many view the last six weeks as a big bear market squeeze. Going into the close the USD holds as a safe-haven even as there is some confusion over what that means. Gold wins out even more suggesting the race of the USD vs. EUR vs JPY is really missing the point. EM FX is a mess and the technicals are flipping from bullish risk to bearish across most markets. Bonds reflect this most clearly with 10Y once again very shy of 3%. As we go to the close for equities the 840 SPX breach is opening a larger pain trade back to 805. The risk of more deleveraging elsewhere (FX, commodities, bonds) will only get larger. The currency to focus on today may be GBP as its most closely associated with financials and they lead the pain trade today. Maybe EUR/GBP has bottomed or maybe its 1.43 tomorrow vs. USD. This isn’t about value merely washing out positions.
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