In Brutal Volatility, Gold & Oil Sag after Spike, 10-Year Yield Jumps after Plunge, Nasdaq Spikes after Dive, and the Fed Can Focus on Tightening

Markets are “functioning,” rather than panicking.

By Wolf Richter for WOLF STREET.

For days, there has been excited talk on Wall Street that a Russian invasion of the Ukraine would hit the markets, which would then spook the Fed and force it away from rate hikes and QT, or at least from faster rate hikes and QT. And today’s market action was precisely what was needed to blow this talk out of the water.

The Nasdaq opened down 3.5%, with a whiff of panic in the air. Then it rocketed 886 points higher and closed with a 3.3% gain, at 13,474, which left it down only 16.9% from its 52-week high in November, instead of in a “bear market.” That was a 7% open-to-close spike!

The S&P 500 Index opened down 2.6%, and after a surge of 179 points or 4.4% open-to-close, it ended the day up 1.5%. This leaves the index down only 11% from its 52-week high.

The Dow soared by nearly 1,000 points open-to-close and squeaked into the green over the last few minutes, eking out a gain for the day of 0.3%.

The Russell 2000 index, tracking small-cap stocks, went through a 5.4% open-to-close spike, gaining 2.7% from yesterday’s close, which whittled down its decline from the 52-week high to 18.8%.

Cryptos moved in near lockstep with stocks, but in an even more exaggerated manner. Bitcoin plunged 9.5% from about $38,000 overnight to about $34,400 and then spent the day working its way back up and currently trades at $38,400, in the same range as yesterday.

Then there was the other side of the coin, which also soothed the Fed’s nerves:

Crude oil grade WTI front-month contracts, after spiking to $100 overnight, rattling a lot of inflation assumptions, fell back to the $93 range by mid-afternoon. And everyone at the Fed and in the White House breathed a sigh of relief.

The 10-year Treasury yield plunged something like 15 basis points overnight to 1.85% in the morning, a classic fear trade, but then began working its way back up, and is currently back at 1.97%, as if nothing happened.

Gold contracts had spiked 4% to $1,975 overnight, in another classic fear trade, but then turned around and gave up more than that, dropping to $1,886 by mid-afternoon.

Silver contracts spiked about 4.5% overnight from $24.50 to $25.57 – another version of the fear trade – and then spent the day stair-stepping back down to about $24.

Dip buyers plowing into the stock market and buying everything in sight, hoping for a relief rally, thereby demonstrating that markets were “functioning,” as the Fed likes to call it, rather than locking up or panicking, was exactly what was needed to keep the Fed on track with its tightening moves.

That the fear trade in gold and silver unwound during the day, and that long-dated Treasury securities sold off during the day, after the wild overnight action, with yields ending back up where they had been, was also reassuring for the Fed.

The Fed’s tightening moves will already be too little, too late, and too slow – they haven’t even started yet – to rein in the inflation monster that the Fed’s long series of policy errors over the past 23 months have unleashed. The last thing that the Fed needs is another distraction, such as panicky markets, for crying out loud. And it got what it needed to stay on track.

But futures are currently moving in the opposite direction.

Not that it matters. Futures have been all over the place. This market is so stunningly volatile that an observation one minute will be obviated by events an hour later.

At the moment, Dow, S&P 500, and Nasdaq futures are all down by close to 0.5%. WTI has ticked up closer to $95. Gold ticked up to $1,914.

Clearly, this market is unsettled and brutally volatile. But it’s “functioning.” Dip buyers are still out there in large numbers. And there is nothing we’re seeing as of this moment that will put a damper on the raging inflation monster.

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  137 comments for “In Brutal Volatility, Gold & Oil Sag after Spike, 10-Year Yield Jumps after Plunge, Nasdaq Spikes after Dive, and the Fed Can Focus on Tightening

  1. Jackson Y says:

    It’s classic market manipulation by Wall Street. Instead of a pump & dump, it’s a dump & pump – take advantage of media scaremongering on Russia-Ukraine to orchestrate a selloff, then last night as the retail kiddies from r/wallstreetbets were going all in on S&P 500 puts, squeeze them all out.

    • Augustus Frost says:

      Or the simpler explanation, it was a psychologically induced move, like all price movements.

      Another example that exposes the inaccuracy of price movements being driven by the supposed fundamentals.

      • Mud says:

        Markers hit 200 dam and got a bounce up 10% then down 20% rinse repeat this could be 18 month game called slow bleed

    • RH says:

      There are fundamental problems with that theory: the price earnings ratios for too many companies are INSANE. I do suspect market manipulation but that a dump and pump, more of secret, Wall Streeter stock purchases to prevent a collapse.

      If you attended business school, you may have been told by your professors that the rate of return on an investment is supposed to be the inherent rate of return plus the rate of inflation. Otherwise, you are essentially giving away your money if the rate of inflation is greater than the net return that you receive. Right now, that has been the case for years, in my opinion.

      I suspect the trillionaire families are the only forces powerful enough to maintain this situation, because only their trillions can either collapse or preserve the stock market like this: like whales in a swimming pool they are much bigger than the daily traders in the market. While the EU leaders all need spine transplants and may not actually decide to rearm and prepare to defend their nations until Putin’s troops are in Paris, I suspect that their owners, the trillionaire families now are supporting our markets; only they can.

      • ru82 says:

        Yep. Since the bottom 50% of the U.S. population does not even own a stock and many do not have a 401k or very little in a 401k, they really don’t care about a stock market crash. It is the whales who care.

      • Mud says:

        Algorithm kicked in ,simple answer

        • Jake W says:

          algos, or the ppt? i don’t know anything about the ppt, but many smart people are convinced the ny fed is behind all of this.

    • Mike says:

      I was watching aljazera last night and was floored. They were showing stock footage of weird military footage that was clearly training related. Their “journalists” were also dressed in full body armor in areas that were clearly not having active fighting.

      IMO oil, gold, etc spiked until the market realized it was complete BS.

      If Russia gets boots on the ground and there’s active firefights in the cities, then sh*t will get real. Somehow I don’t think Ukrainians and Russians have the appetite to Duke it out like that.

      What the real wildcard is turkey (nato member) . If they unilaterally block russias access in the black sea, it will be interesting to see what happens from there.

    • Bobbleheadlincoln says:

      Does anyone think that a good portion of the US stock market influx late yesterday could have been foreign investors spooked by the prospect of instability in Europe and the down markets in all other global locales (China/Asia prospects aren’t that great in the near-term)? I was wondering specifically whether large sanctions on oligarchs that utilize dark money laundering practices could have led to influx of their money into our market as a safe haven.

    • Jacob says:

      To say this is a market functioning is comical Wolf!! Gold getting smashed by $100 with the world where it is right now, and physical buying so strong was hard to watch… and certainly not a functioning market. It was one of the greatest examples of a manipulated markets I’ve seen.

  2. WES says:

    Yes, the market viewed Russia invading the Ukraine as a nothing burger.

    • Augustus Frost says:

      That’s essentially how the headlines read because the market recovered.

      If it had not, the invasion would have been the supposed cause.

      Happens all the time, over and over.

    • Old school says:

      I remember listening to the GE radio in my bedroom late at night in 1968 when Russia invaded Czechoslovakia. Don’t remember which network, but there were reporters on the ground giving reports as the tanks came in. It was very interesting to a 12 year old trying to understand it all.

      • DR DOOM says:

        We had journalists in those days that survived WW2. Hard to blow smoke up their ass. Drank straight whiskey, chain smoked un-filtered camel’s and at had at least 2 divorces. Some did baseball. They could keep you on the edge of your seat for nine innings in a 1/1 game and give you a heart attack when the squeeze was on.

        • VintageVNvet says:

          Good one DD; this old boy remembers well when EVERY store/office/home had the RADIO on for the World Series, and ya better not say a word until the breaks between innings, etc.
          Most of those places also were listening to their fave team all season too,,, and all the kids knew all the numbers for their fave players as well..
          Most of us spent our allowances/earnings buying baseball cards bubble gum too!!!

        • 91B20 1stCav (AUS) says:

          DD/VVNV-as long as we’re strolling down memory’s lane, remember Giants/Yanks World Series week. Don’t know why San Diego USD allowed it, but we watched the games ON A (b&w) TV wheeled into the classroom just for that purpose (WS still day events, then). Though they suffered a heartbreaking loss, i became a lifelong Giants fan, then (the Padres were PCL/Reds’ farm team at the time, and there were very few Dodgers’ fans in SD), and, as the t-shirt said “…in our lifetime…”, saw them come good in 2010…

          may we all find a better day.

    • tom20 says:

      The markets, including Russia, sorted through proposed sanctions,
      and bounced up.

      Energy is power. At this point are they more fearful of Putin, or their own peasants.

    • DR DOOM says:

      The Gov’t needs the invasion to stay in play. C19 is now a yawner. The Gov’t does not want to talk about the I word. $95 oil is still a bitch.

    • Wisdom Seeker says:

      This was a classic “sell the rumor, buy the news” knee-jerk scenario.

      • historicus says:

        But this isnt just “news”
        The world changed with this invasion…..

        • phleep says:

          To the USA and Europe, this is already a “chin-check,” as they call it in boxing and prisons.

          It aint just Crimea.

          My all-in Nasdaq pals are holding to their faith so far. Tech will save us. If a Taiwan invasion happens, there is a multi-frontal stress-test to US hegemony. One quite possible future state of the world.

          Remember “the End of History” meme (Francis Fukuyama) circa 1990? Ha ha! History’s back, baby! Steel and artillery versus the PPT Potemkin markets theater. Popcorn!

        • VintageVNvet says:

          just another re-run of the events where the British Empire was challenged by the loss of India and Egypt at almost the same time 60+ years or so ago.
          kinda sorta ”get used to it” as Russia and China ”gang up” on USA hegemony, etc.
          WE the PEONs of USA can only hope that the oligarchy who own our so called public servants learned something back then, and will do what they can to bring back all the critical domestic manufacturing to service OUR USA needs,,, as the efforts back then clearly led to a long long recovery…
          GO long “HOPIUM” if you can!

    • John H. says:

      WES

      Maybe less a “nothing burger,” and more like one-of-many seemingly intractable problems:

      1) War in Eastern Europe
      2) War in Eastern Asia
      3) World debt level anxieties
      4) Energy prices and fear of shortages
      5) Food prices and fear of shortages
      6) Drift toward socialism, with implications on productivity
      7) Drift toward constructivism, especially in money and banking
      8) Recent realities involving public health

      Sort of a biblical War, Pestilence and Famine theme, with a twist of mis-government thrown in.

      It’s been ever thus, and volatility will increase due to high systemic debt levels, IMHO.

      For perspective in today’s swing reexamine 1987, 2000, and 2008 short-term stock and bond gyrations, and systemic debt has grown since then.

      • phleep says:

        NFTs and South Korean pop groups will stand up to this!

        Luftmenschen: air men. Floating away like the bubbles they rode in on.

      • aging in AZ says:

        And the market climbs these walls of worry

  3. Carlos Leiro says:

    Monkeys do it better ?

  4. Leo1992 says:

    US Fed printed 17 Billon Dollars last week. We will see this market strength if and when it really stops printing

    • andy says:

      This 6% swing on Nasdaq just says we have another 30% to go.

    • Jack says:

      If anything, the printers will work overtime now! and they will add more printers on top!

      The pretext of an all out war in backward Europe is salivate inducing prospect for s lot of (congress/investors )!! To clear their positions and realign them for the coming recession!!!

      The 16th March FOMC meeting will rubber stamp moooorrr printing artwork that includes all the great Presidents portraits 🤣🤣🤣

      It will be even hotter in the printing rooms when China ramps up its rhetoric on acquiring those semiconductor plants to the east 🤓🤓

      and BTW. OIL will be trading @$200 by the end of March!

      • Hg says:

        I see evidence of the Elite 101st Day Trader Batallion at work here. They are behind enemy lines calling in airstrikes to nuke short positions 🇺🇸

    • Chris P says:

      The FED has the CBOT to manipulate metals, stocks and cryptos with unlimited $$$. Glad to see the markets are working. 🤢 🤮 🤢

  5. Jackson Y says:

    I don’t see any reason why this ought to slow rate increases, as Wall Street is now asking for. This geopolitical crisis will be confined to Eastern Europe unless Biden drags the US into a war it shouldn’t be involved in. If anything, the impact to the US economy will be higher oil prices and potentially higher overall inflation. It’s crucial for the US to regain its energy independence.

    • drifterprof says:

      I may have been misled, but from what I’ve read recently, the U.S. is currently energy independent (production is slightly more than consumption).

      For example: Article on Axios “The U.S. is now energy independent”

      • Wolf Richter says:

        “energy independence” is a misnomer. The correct phrase is: the US is a net exporter of energy — it exports more than it imports.

        But there is a huge energy trade in both directions, for various reasons.

        For example, California (and the West Coast) are cut off from the producing regions east of the Rockies. California produces some oil, imports some from Alaska, and imports from the rest of the world. But much of the importing is done by California’s refineries that then refine the imported crude oil and export gasoline, diesel, and jet fuel to Mexico and South American countries. This is a HUGE profitable trade for US refineries.

        The US also exports via pipeline large amounts of natural gas to Mexico, and imports crude oil from Mexico.

        These are just examples of the complex trade relationships that show how interdependent energy producers have become for various reasons. So “energy independence” is really not the right term here.

        That said, no country and not even OPEC will be able to do to the US what the Arab Oil Embargo was able to do in 1973/74.

    • AV8R says:

      3 Words: Plunge Protection Team.

  6. Publius says:

    Nothing can stop the stock market!

    An asteroid has destroyed DC;
    “An era of low regulation is at hand; buy!”

    The Yellowstone caldera has erupted into a supervolcano, covering the world in a cloud of ash:
    “Invest in broom and dustpan makers, buy, buy!!”

    • ivanislav says:

      Jeremy Grantham “vampire market”

    • Wolf Richter says:

      “Nothing can stop the stock market!”

      Nasdaq is down 17% since November. Many dozens of individual high-flyers have gotten crushed 50%, 60%… over 90% from their highs. I covered some of those. This market is getting crushed stock by stock. It started in February a year ago.

      • FastEddie says:

        To amplify your point, I follow the individual components in the S&P Tech Index – 67 companies that are a mix of large software (MSFT, CRM, etc) and large hardware companies (AMD, INTC, etc). Virtually all of them flattened out in the October/November time frame and have been trending down ever since. Some small moves (MSFT closing high in November was around $344; closed today at $294 – down $50 or 14.5%), some big moves (AMD $157 to $116 – down $51 or 26%) and some UGLY moves (SQ from $275 in August to $180 in November to $95 today – down $180 or 65%).

        Not meme stocks, not Reddit WSB favs, not unicorns. The largest of the tech companies.

        Or did you forget to add “from going down” to the end of your sentence “Nothing can stop the stock market”?

        • Publius says:

          Yes, the stock market has gone down, but not because of a war between 2 countries that produce a third of the world’s wheat, a war that will likely lead to increased oil and gas prices, significant cyber attacks, and general disruptions in world trade. But, hey, the Fed might not raise rates as high as quickly, so that more than balances out boring real- world impacts.

      • Gattopardo says:

        Wolf, you may have the cause and effect reversed. It may well be the belief that the Fed won’t be able to (or won’t have the guts to) tighten as aggressively that triggered today’s rally.

      • ru82 says:

        Your correct. I was looking at some of those high flyers. Some are back to pre-covid blastoff. Some are actually reasonably priced and are almost value stocks now. PE around 20 and P/S between 10 and 20 and they still have good growth. Example….Zoom now has a PE of 35, a P/S of 19 and growth of 35%. The stock was 90 shortly before the pandemic. It went to 500ish and now back to 99. What is different. Pre-pandemic when the stock was 90 it had 1.2 billion in sales. Now the stock is at 99 it has 3.2 billion in sales. It has increased sales by 200% yet the stock is only up 8%.

        So what are the ones that are overvalued because you can find 100s of the high flyers that are down over 50% to 80% but NASDAQ is only down 15%. I guess the FAANG are keeping NASDAQ elevated?

        • Augustus Frost says:

          The idea of “value stocks” due to the PEG ratio is a rationalization. It’s another symptom of this mania.

          A company like Zoom is a bag of hot air. The ARK Innovation fund calls it a “disruptor” but there is nothing revolutionary about it. They are already competing against CSCO (webex), MSFT (Teams) and Google (Google Meets) at minimum. No barrier to entry there.

          Its stock price and valuation are utterly absurd, even after crashing.

          This is aside from the fact that earnings aren’t even real money. It’s an accounting number which “investors” can’t spend. 99+% can’t monetize it or company assets either, as they have no influence on corporate strategy.

          Cash return from dividends is zero or negligible on most stocks today and has been since prior to 2000.

          The only actual explanation for these nose bleed prices even after such large declines is manic psychology.

          Never have “investors” paid so much for so little.

        • historicus says:

          Augustus
          “Never have “investors” paid so much for so little.”

          And the Fed declared they wanted to FORCE the investor to take more risk. (as they pounded long rates) How can this be healthy?
          Forcing investors…is that the 4th or 5th Fed mandate?

        • 91B20 1stCav (AUS) says:

          AF-akin to the term ‘Xerox’ meaning a copy machine, back when?

          may we all find a better day.

      • Harry Houndstooth says:

        Pure unadulterated wisdom dispensed daily!

        The markets have rallied after the news that Russia invaded Ukraine as it it did not happen.

        It did. It is not good for stocks.

        Back up the truck and load up on SRTY and SQQQ.

  7. andy says:

    Isn’t tightening postponed due to geopolitics? In fact, don’t we need another $Trillion?

    • Old School says:

      Hard to say, but the 21st century has been one calamity after another that piles up unproductive debt. Several mid east wars, the GFC, the housing bust, the pandemic, now a new cold war just means more unproductive debt and slower growth.

      Heard an interesting theory that Fed can fight inflation by bleeding the right amount out of asset markets to manage the wealth effect down and thereby ease up on demand, but not cause a recession. Sounds like a PHd solution that would not work in practice.

      I have come over to Lacy Hunt’s side that more and more government debt means less and less productivity which means less and less growth which means lower and lower interest rates unless Fed is given the power to directly drop money into people’s accounts replacing credit creation by commercial banks (not a good thing in my opinion).

      • Augustus Frost says:

        That’s because it is a PhD theory which has no relevance in the world populated by actual human beings.

        There are no “wizards behind the curtain” to guide the (US) economy to ever increasing prosperity. Debt and asset manias aren’t wealth. There is never something for nothing.

        No, it isn’t different this time.

        I also don’t agree with Hunt’s thesis on interest rates. I’ve read his commentary before but there is nothing unique about Western developed economies that enables these countries to pile debts endlessly to the sky.

        There just is no pre-determined limit and no “trigger event” identifying the end. It’s a process not an event, one which is occurring right now.

        The reversal in interest rates will occur when collective perception towards risk changes, regardless of what any government or central bank does or doesn’t do.

        Government policy doesn’t eliminate risk, just transfers it to the taxpayer or all currency holders. The unprecedented mispricing of risk just means there are a lot of bad debts waiting to be acknowledged and inflated assets ready to deflate.

        • historicus says:

          If paying taxes is Patriotic, what then is the intentional debasing of the Nation’s currency? Question for J Powell

        • phleep says:

          I have been waiting for the other whose to drop, a vicious unwind on this trade for so long. But this is only an indication of the incredible capital the US built up in the American Century, being drained off. First gradually, then all at once? Rome took centuries to unwind.

          There might be bellwether moments though, amidst a general slide, punctuations, like Britain and the Suez crisis. France and the battle of Dien Bien Phu. Britain standing alongside the US now sounds like a paper lion, long since. Hoe to maintain a tax haven economy when your oligarchs are other side of a war? Diversify to African flight capital some more?

        • Augustus Frost says:

          phleep,

          US did have an incredible capital base at one point but more importantly, had the culture which created it.

          Look at the culture now. That’s why the country is being destroyed. It’s been like Chinese water torture to this point but still happening.

          Economically, look at FRB reported “real” median income and net worth since the late 90’s which have both flatlined. And this is during a period when the economy supposedly expanded 90% of the time. It also took a 5X and 14X increase in the national debt and FRB’s balance sheet to achieve this pathetic result.

          As these two data points indicate, the majority of the population has been sucking wind financially the entire 21st century. Maintaining their living standards by feeding at the public through and increased debt.

          This is during “good times”. What is going to happen later? (This is a rhetorical question.)

        • Bobber says:

          I’ve read Hunt’s stuff as well, and while I’m impressed with his analysis on debt levels and growth potential, I walk away with the impression he’s missing something. He seems to assume inflation will always be low and central banks will forever be able to repress interest rates.

          When I found out he was a former central banker, it then made sense to me. He thinks like a central banker, with little appreciation of variance, risk, bubbles and politics.

          It reminds me of those drivers that do 80 mph downhill on an icy highway, thinking they can always correct things if the rear wheel slips. Sure, they will OK 90% of the time, but…….

          Buying long-term bonds in this economic environment is similar to that.

  8. 2banana says:

    So let me sum up.

    In the largest military combat operation since WWII…

    Russia conducting a full scale invasion of the Ukraine…

    On that day…

    The stock market ended GREEN.

    Let that sink in.

    • Cvillian says:

      Exactly. Your words say it all. This market is delusional at best. Amazing what happens when you get addicts hooked on free money.

      • 2banana says:

        I am thinking a couple of nukes get lobbed around and we will be at record highs again…

        • WES says:

          But gold would fall!

        • Brant Lee says:

          It looks to me gold is the first choice asset to hunker down into the trenches with, or at least that is the way the markets first reacted with news of the invasion.

          Depending on where you are is the key. Markets in most regions came to their senses a few hours after the initial response.

          If you’re a Ukraine citizen, your ass is still heading for the border with only what you can carry. A few gold coins in the pocket would not be a nuisance.

      • phleep says:

        Whom the gods would destroy, they would first intoxicate with free helicopter money.

    • Alku says:

      this is a perfect illustration that market is essentially driven by the collective psychology, but not news

    • Jackson Y says:

      The market was down the last 5 days in a row. It was already priced in.

      • Augustus Frost says:

        There is no “discounting” by “The Market”.

        The only thing “investors” (not “The Market”) are discounting is their delusional view of the future.

        “Discounting” is academic nonsense from the Efficient Market Hypothesis, both ridiculous and unproveable. “The Market” has no mind since it’s an anthropomorphic abstraction; “it” doesn’t exist, so it cannot see or anticipate anything.

        No one has a clue what is actually going on in the Ukraine and even if they did, can’t translate it to how it impacts any asset price.

    • Moosy says:

      Even more interesting is the brain dead BTFD – buyTheF$Dip on all those technology stock.

      PE’s over 30, no biggy for them.

      Also interesting was that Russia’s energy companies went down for a while over 40% and now having PE’s in the absurd range of below 2. As if Russia was under attack instead of attacking. As if Russia cannot sell it’s gas in China or anywhere else.

    • roddy6667 says:

      Sounds like the bankers, financiers, and billionaires (also known as the people who run the world), approve of Putin’s move.

    • Old School says:

      There are billions to be made in the markets so there is a lot of brain power that goes into it. Retail investor is outgunned on short term basis so we can be late to the party with information, even a few hours make a difference. I think another thing is sometimes the street is offsides in their position and as they unwind it market moves different than you think would be rational.

      Fed policy of inflating assets undermined value investing for a decade. Some value money managers closed up shop. Most just bad poor performance and lost assets. Will be interesting if Fed ever normalizes policy if value investing comes back in style.

      • John H. says:

        Bannister at Stifel believes that S&P500/commodities ratio defines the end of reign of growth stocks after market correction:

        “ Watch S&P 500/commodity ratio post-dip, if up, buy Growth” [and reverse]

        That and 2 bits buys you an insipid cup of cafe joe, of course!

    • historicus says:

      Algos and AI can not deal with the magnitude of geopolitical events.

      The world changed this week. It, IMO, is not just another “fade the news” trading ploy.

  9. Inno says:

    I’m a dip buyer…at sp500 3000.

    Of course, I’ll nibble all the way down, and keep rolling sucker bet 3-6m Ts until then…to eventually get back to 60% equity exposure.

    • historicus says:

      I bought the first break
      I bought the second break
      I was the third break

    • Cookdoggie says:

      I’ll buy the dip as well, wake me at S&P 2500 to start and 1000 to finish.

  10. Yancey Ward says:

    Functions just like a trampoline.

  11. Catxman says:

    The most interesting marker is the gold price.

    Its stability, which is a bit wobbly but basically within sensible range, strongly suggests we’re in for a smooth ride. It’s almost as if central governments can’t really suppress inflation at around 2% for too many years before things EX-PLODE and you got yourself our current inflation monster situation. Almost like soo…

  12. Old school says:

    It’s hard to keep up. Are we back to bad news is good news?

    The Russian situation is not good for real economy as they export energy and important metals. Globalization is continuing to retrench which is a drag on real economy at least the way most economists see it.

    • KPL says:

      Also oil prices going up will see inflation does not go down!

      All the more reason for the market to retrace some!!

  13. dang says:

    The behavior of the markets is exactly what I would expect when there is an inflationary amount of Fed liquidity badly engineering the markets.

    Violent attempts to sustain a bubble are not a new phenomena, invented recently. They are in fact, familiar, and have been in existence at least as long has been man.

    The question, in the long run, which seems to be until we forget, is ultimately answered.

    • dang says:

      Like the word, love, used and abused across all time, yet, still retains its value.

      • dang says:

        Or the word, business, used and abused across all time, yet, still retains its value.

    • Old school says:

      If government and Fed policy has taken us to a bad place, history tells us the next card that is usually played is price controls and capital controls. There is a little talk already. Fed tries to influence us with jaw boning, but if they get offsides more aggressive market controls might be implemented to save the system.

      • historicus says:

        OS
        Just remember that according to MMT, the way to deal with inflation is not rate hikes but with TAX HIKES… draining money from the private sector into the government.
        SO, the inflation created will end in a bigger government and more funding of nonsense out of Washington DC.

        • phleep says:

          Tax hikes are politically impossible, especially with a Senate representing a few micro-red state voters in the Constitution. And, a Republican president once every 8 years or so, does another cut. Hence wars unpaid-for and on the credit card, starting with Vietnam, and the same-era War on Poverty culminating in today’s helicopter money and waivers of student loans, etc., while debt piles to he sky. It follows the political path of least resistance. It is like a squabbling couple sitting in a car enraged while the gasoline and air in the tires are draining out of the car. That is, until a big enough event captures everyone’s attention, clears the decks, and funnels things down to a new order. Hello 1932, 1940.

      • Mr. House says:

        How is keeping interest rates subdued for a decade not price controls? If the FED is keeping the market inflated and overpriced due to whatever reason, how is that not price controls?

        • phleep says:

          Yeah, I thought it was stable prices, not one-sided propped up, inflated and manipulated prices.

        • Old school says:

          You are right. Price of money is the most important market price. Not many complain til something breaks.

      • Augustus Frost says:

        Capital controls won’t happen in a bull market.

        But it’s a real risk in the US when the DXY tanks in the future, somewhere below 70. Probably be selectively applied to US citizens and residents like it was in the UK after WWII, at least to start.

        If or when this happens, I also expect US to demand citizens and residents repatriate foreign assets so that it can be used for the “national interest”.

  14. harry hv says:

    There is a team of people whose job it is to prevent downward spikes in the market, colloquially the Plunge Protection team.

    If indeed they are active at the moment – and we may see some more indication tomorrow – they can congratulate themselves on a job well done.

    • dang says:

      I had the sense today, that the Fed was the source of the miraculous recovery of the financial markets, which by the way, have become America’s most important industry.

      • Doityourself says:

        They just forgot to tell their friends across the pond what they were planning today. No such thing as dip buying over in European markets. How strange ;)

        • Wolf Richter says:

          European markets close shortly after US starts trading. A lot of the buying/trading in European markets is done from the US. I wouldn’t be surprised to see dip-buying in the European markets on Friday.

        • Harry Houndstooth says:

          Free money.

          Load up on SRTY and SQQQ on this dead cat bounce.

    • ivanislav says:

      Wolf says they don’t exist. I’m not sure. They could just put it under some “national security” mandate and keep it secret. Clown world. QQQ bounced off -20% ATH like a rocket.

      • phleep says:

        The madness will continue until excess liquidity is drained out of the system. If it assumes the dynamics of a vortex it can be quick and steep, but it generally doesn’t, especially since the dawn of the Fed put. So far, traders expect the put will take hold soon enough, so they don’t panic-sell at that level. The band just plays on.

  15. polistra says:

    The stock market is a murder meter. It loves mass destruction and torture and war and genocide.

  16. KPL says:

    “Clearly, this market is unsettled and brutally volatile. But it’s “functioning.” Dip buyers are still out there in large numbers.”

    This is always the case. It was only after “Maestro” Alan Greenspan thought he was THE King Kong and started extending his “helping” hand that markets lost its ability to “function”.

    Today if inflation figures were not where they are and “Maestro” (or for that matter the other clowns who followed him and the one in charge now) had been in charge we would have had a 50 or 100 bps cut when the first shots were fired.

    When you have clowns running the world’s circus thinking they are King Kongs how will markets be allowed to function?

    • dang says:

      Personally, I think the Fed is always wrong, by design. It is an instrument of the banking system that has been the principal tool the has changed the complexion of my beloved country from a manufacturer to a banker.

      So yes, the Fed should be extinguished. The experiment went the way the way Andrew Jackson and Thomas Jefferson warned us about the bankers.

      • dang says:

        The corruption has reached the point that one inadvertently cringes at singing “America, the beautiful”.

        Which, I agree can be said about all of human history. The people who are now in charge of the world, see things differently from me.

        They are still immortal and I ‘m not. They are beautiful and talented, physically, I’m not.

        They have more to lose than me.

        • dang says:

          The gates of heaven will swing open to selflessness closed to greed, told me by the scriptures of my youth. And I still hope the hell it’s true.

        • dang says:

          America’s most valuable company has a communist Chinese work force that makes a fantastic margin on brand loyalty while consuming resources in its major market and refuses to pay taxes.

          We are frigged. maybe

      • KPL says:

        “has changed the complexion of my beloved country from a manufacturer to a banker.”

        You can say that again!!

        These clowns seriously think they are gods who can control the world economy with easy money and plenty of it. How can drive sense into people who think they are gods and are in fact lunatics?

      • Old school says:

        Without having the dollar anchored to gold why would the Fed be early to shut a bubble down. It appears to me they just let bubbles run knowing they can print whatever it takes to clean them up. This has changed market behavior knowing there is a good chance Fed will repay your gambling debt.

      • OutsideTheBox says:

        The Fed is over a century old.

        The USA does not and will not end an institution that has stood the test of time.

        Calls to End The Fed are futile.

  17. ivanislav says:

    “The last thing that the Fed needs is another distraction, such as panicky markets, for crying out loud. And it got what it needed to stay on track.”

    The fact that you (and a lot of market commentary) believe they might reverse course if markets go down says the Fed put is alive and well and “markets only go up”. The Fed hasn’t convinced markets it will follow through and tighten meaningfully.

  18. Citizen AllenM says:

    Ok, if i was Bad Mad Vlad, here is my next steps:

    Sanctions, shmanksions.

    Cut 5 million barrels a day from oil production. Buy all of the forward contracts for gold in the world. Make them deliver the gold, and then announce, oil will be sold for chevronets (8 gr .900 gold) at the rate of 10 barrels= 1 troy ounces of gold (roughly 0.3 barrels per chevronet). Dollars will not be exchanged for chevronets outside of one office in St. Petersburg. Gas will get the same deal.

    Now, on the other hand, there will be discounts for our Chinese friends.

    Dedollarization will only take days.

    Guess what, now comes China with Taiwan, and now are we going to sanction China and cut off our cheap stuff?

    Ha.
    America wasted it’s strength in the Sandbox for 20 years of futility.

    And now we have real problems, and are a paper tiger.

    Are you ready for America on defense? Defending the dollar, and desperately trying to keep world peace. And failing.

    Plus our domestic disorders? Meh. Buy the golden ruble, because the dollar is going to be really wobbly.

    All of those folks buying dollars in Russia were going the wrong way….

    • dang says:

      If I were Vlad, I would take the best offer, which is exactly what he seems to be doing.

      Russia is an ancient concept.

      • phleep says:

        This is not the First but the Fourth Battle of Kharkov, in Vlad’s eyes, Third Battle of Kiev, a restart of the Great Patriotic War which has dominated Russian media ever since Vlad got to the top. Schoolchildren visit Volgograd (Stalingrad) War Museum in droves. Action movies (some very well done) are all about it. Soviet Storm is an incredible TV series about it from 2010, worth a watch.

    • nick kelly says:

      What would they buy the gold with?

  19. dang says:

    The outcome usually ends with a win for the home team, no matter what the cost.

    The Russian’s feign is discouraging, fools chasing fools. In the midst of their acclaimed historical, sophisticated, society.

    Without grace, it looks like what it is.

  20. Finster says:

    The Fed needs to focus on one and only one thing … getting inflation down. If it takes its eye off the ball, there is no path back to prosperity and American living standards will fall.

    • dang says:

      The Fed needs to make a 100 basis point step in the interest rate and stop paying the criminal banks for holding excess reserves.

      Inflation destroys the class structure that is necessary to nurture a just society.

      The Fed is a joke, like the supreme court. Un-elected dipshits that are making random decisions about the painful future ahead for all of us because dilbert from harvard is in charge.

      And the pain is intensified with each turn of the screw. Neoliberalism requires a strong federal government like what it is, or will become, fascism.

      Is this a time that being well adjusted is a sign of mental illness ?

      Yes, it is.

      • dang says:

        Silence is our greatest fear.

        The cacophony of sound informs our life.

        Like the smell of the wind, a hidden truth.

    • historicus says:

      ““Inflation is what happens when people increase the money supply by fraud, imposition, and breach of contract. Invariably it produces three characteristic consequences: (1) it benefits the perpetrators at the expense of all other money users; (2) it allows the accumulation of debt beyond the level debts could reach on the free market; and (3) it reduces the Purchasing Power of Money below the level it would have reached on the free market.” mises.org

  21. dang says:

    Fools are the least likely to adhere to the rules. Otherwise, everything would stay the same.

    Every one that went before us left their imprint at the same measure, the humble and the arrogant.

  22. OutWest says:

    The Nasdaq is trending down and that is what I think this is all about. Tech tends to lead the way down…I’ve seen it a few times before…

  23. SpencerG says:

    LOL… I saw Art Cashin on CNBC at about noon EST. He said that when he was first starting out as a trader a senior trader gave him this advice about bad news and the markets, “Never bet on the end of the world… it can only happen once.”

  24. SpencerG says:

    The Kingdom of Saudi Arabia sets the price of oil. All others just dance to their tune.

    • Augustus Frost says:

      Russia does or did produce more oil. So did the US until recently.

      • SpencerG says:

        It doesn’t matter… no one can ramp oil production up or down as easily as the Saudis. They have proven that at least three times in the past decade. The current prices are only because in January 2021 they decided to withhold a million barrels a day from the markets. By withholding ten percent of their oil from the markets they are getting 100% more for the other 90% (as compared to 2020).

        The Saudis use oil as a tool of their foreign policy as well as a means of funding their own government’s coffers. Unless the Biden administration can prevail upon them to help put the Russian Bear back in its cage, I wouldn’t expect them to open the spigots again until there is a nuclear deal with Iran. Then they will want oil prices to plummet to harm their Shia enemy.

  25. Phoenix_Ikki says:

    Not that the FED has any creditability left but just saw Mary Daly already trying to soothe the market before any rate hikes is even in place. Something to the tune of “long and painful correction’ for economy isn’t in the cards just because inflation is high, A transparent Fed is a major difference from decades earlier, Daly says”

    Translation, we will be the stock market’s B forever and transparency meaning we won’t rock the boats for all you elites out there, nevermind inflation is crushing everybody else…geez these people are truly freaking terrible.

    • Jake W says:

      i don’t think it’s even that, it’s more that these people have a level of hubris rarely seen before. she, in her heart of hearts, actually does believe that the fed can fix all problems with the economy and prevent recessions or depressions.

      i don’t for the life of me see how being “transparent” actually changes reality.

      • historicus says:

        In a system that boasts of checks and balances..
        WHO CHECKS THE FED?

      • Nathan Dumbrowski says:

        I feel it is disingenuous to state they are more transparent. Tech has made it possible to share, spread and disseminate information nearly instantaneously. No longer are we waiting for the newspaper or nightly news to share information. Stock trades are public information (largely) and they can’t hide from the flashlights searching for dirt or truth

    • Wolf Richter says:

      What she actually said was that the Fed will communicate well in advance what it will do, so that there are no surprises for the markets, so that markets can therefore work through this gradually without triggering some kind of sudden market event. Her comments were all about how great the Fed’s communications are now — such as hers!

      • Phoenix_Ikki says:

        Yup, the whole statement reeks of corp speak similar to your typical “We will do better” to placate the folks that want to believe. As if the crap we’re seeing in the market and asset inflation stems from communication issue rather than bad policy all around.

        I will say if they want to work on communication and transparency, how about acting less feckless and stick to real meaningful change instead of being reactionary to how the market react in the short term or trying to gaslight the entire population that inflation is “transitory”

    • Old School says:

      Fed has facilitated so much financial gambling with leverage they don’t care tighten without communicating what their plans are so everyone can get positioned in advance. I bet they cross their fingers with each 1/4 point hike because nobody really knows what is going to break first. They gave corporations time to refinance at lower rates in the last two years so they bought a little insurance, but time will tell if policy can be tightened to any significant degree.

  26. David Hall says:

    Oil companies have incentives to drill with Brent crude at $98. this morning. Coal consumption is up this year compared to last year. LNG is in short supply. European natural gas inventories are low. China started importing more U.S. metallurgic coal after boycotting Australian metallurgical coal..

  27. YuShan says:

    The ideal case would be when the markets deflate slowly without panic. An average 3% off every month for the next 4 years would be great. You would then be back at historically normal valuations in 2026.

    I remember how my friends and I called the 2000-2003 bear market in our local index a “stealth crash”, because there was never any real panic. It just slowly deflated over a three year period, but in the end it was -60% or so from the top.

    If the Fed needs to raise rates substantially (CPI inflation may force this upon them), then they will be forced to either unwind much of the balance sheet or pay high rates on excess reserves (very costly for the taxpayer).

    Ideally, much of the corporate debt bubble could be dealt with by converting it to stocks, which would make the financial system a lot more stable (prevention cascading defaults in the coming downturn). Government debt is still a big problem, but it helps if you don’t need to also deal with corporate bankruptcies.

    • John H. says:

      YuShan

      Might as well add consumer debt, financial system leverage, and actuarial debt into the mix. All tallied, the world has had not only NOT de-levered since the GFC, but we have added to systemic debt.

      It seems that big inflation or large write-offs (or combo) are the only way to finally slay the debt monster.

      Ironic that the Fed, a supposed instrument of “stability” has enabled today’s de-stabilizing debt levels…

  28. Michael Engel says:

    1) NDX for entertainment only : yesterday selling climax was followed by huge response.
    2) NDX daily : T of T&K of the cloud might limit the response.
    3) NDX weekly : the cloud might limit NDX rise.
    4) A volatile trading range, before moving up.
    5) NDX monthly : NDX flipped this month.
    6) Dec 2021 was monthly DM #12.
    7) NDX might rise for 2-3 more months for DM #13.
    8) NDX weekly : a support line from Sept 21 2020 to Nov 2 2020
    became a resistance line. NDX might test this line.
    9) If the monthly count down will cancel :
    option #1 : to a new all time high.
    option #2 : a new monthly flip, a worse case scenario.
    10) NDX monthly is bullish. NDX weekly might end up in a bullish territory at the close.

  29. Augustus Frost says:

    Sanctions history proves that economic blackmail doesn’t work as intended.

    Everyone isn’t motivated by economics or money.

    Sanctioning major countries like China and Russia is going to accelerate the end of USD as reserve currency by motivating the use of alternate payment systems.

    • phleep says:

      That might explain a surge in crypto this morning.

    • Nathan Dumbrowski says:

      Always thought that sanctions were double edged. Sure we block you and lock you out of the system. One of the impacts is that this pushes money to be spent in the black or grey market. That means that the companies are no longer using money that is tracked and taxed. So great to punish the companies, people and countries but there is an impact to sanctions to the sellers as well

  30. David W Young says:

    I think that the whipsaw action in stocks, bonds, oil, and precious metals was more a function of the Plunge Protection Team out of the infamous New York Fed than anything else. This rouge organization can create money out of thin air and can enter the futures markets in such leveraged trades that neck braces from yesterday have gone into backlog.

    And don’t blame the Canadian truckers in Ottawa for that supply chain issue, they had their bank accounts frozen for one whole week before the Canadian government, for now!, realized that government bank account seizures on a grand scale ain’t good for the credibility of the Canadian banking system. Money goes where it is treated best.

    Amazing how the high-flying NASDAQ was crossing the Bear Market 20% down-from-high marker and on a day when Eastern Europe erupts into armed conflict that could eventually spill over into the Baltic states with a mealy U.S. response to Ukraine’s invasion, the power and influence of the United States is shown to be greatly diminished, oil and natural gas supplies are destined to be constrained if not cut off from Russia into Europe for time uncertain, inflation continues to ravage the Working Class American who is not on the Open Market Committee, on and on and on, ……… that U.S. stocks end up on the day. Bear markets always have very dramatic counter-trend rallies, but there were very big hands behind the scenes to give a great assist to the intra-day reversal on February 24th, 2022.

    Oh, and the Fed continues to buy Mortgage Backed Securities even as the 30-year Lodestone of Homeownership breaches the 4% level, and will continue to rise on its own sans the foot-dragging, jawboning, double-dealing Fed as future loan payments lose value via inflation and indebted consumers experience another Fed created real estate bust amid mushrooming job losses, unaffordable homes, and new construction inventory that will eventually burst onto the market.

    Yesterday was akin to U.S. investors celebrating the invasion of a sovereign country and the loss of life that that entails. Very bad optics on the PPT’s intervention timing yesterday, but a softening economy with Consumer Confidence sinking like a rock, 10% CPI coming up the pike as the Producer Prices at all levels poop out the end of the Supply Chain Python, geopolitical unrest just getting a head of steam as China eyes the Straits of Taiwan for military maneuvers with many a landing craft aboard ships, and $4 gasoline becoming a sure thing in the next several weeks.

    The Fed is going to be tightening for many, many quarters ahead, Perma Bulls. Not even a 5% Fed Funds rate by July 4th would do much at this moment to slay the Inflation Monster or put him or her back in the bottle. Inflation is one metric the government can’t distort or hide from the Masses unless the Proletariat all live off the grid and are growing their all everything.

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