White knuckle moments as nothing goes to heck in a straight line?
By Wolf Richter for WOLF STREET.
The crude oil market had a white-knuckles moment today. WTI futures plunged intraday from $126.82 a barrel to $103 a barrel for a few moments, as the bottom just fell out after the UAE called for OPEC+ to increase production, followed up by Iraq which said that it could increase production if OPEC+ asks. A production increase might actually happen because selling more oil at these prices would be great for a whole slew of OPEC countries, and they’d love to do it.
The announcement worked to bring the price down, after having hit a panicky $130 earlier this week, though I don’t think talking the price down was the goal; OPEC generally doesn’t talk down the price. That’s the job of US Presidents.
The price of WTI then bounced from there and currently trades at around $110. I denoted the 18% flash crash with arrows. Note the crazy price spikes and volatility since the beginning of March (chart via Investing.com, each column is one day):
The two-year Treasury yield jumped 5 basis points today, and 13 basis points over the past two days, to 1.68%, the highest since November 2019, as rate hikes are making their way into the calculus.
This yield is still ridiculously below the rate of inflation as the Fed – the most reckless Fed ever – is still pressing short-term interest rates to near 0% while CPI inflation in February, to be released Thursday morning, will likely be close to 8% and go the wrong way from there:
Volatility in the two-year yield has been going wild from day to day, mostly in the upward direction, including a 25-basis-point jump on February 10, but also peppered with sudden drops:
The 10-year Treasury yield jumped 8 basis points today and 20 basis points over the past three days, reclaiming 1.94%, which it had given up at the end of February:
European stocks spiked massively today, in the manner most typical for bear-market rallies, with the German DAX up nearly 8%. The spike still leaves the DAX down 15% from its high on January 5. The French CAC 40 jumped 7.1%, the London FTSE 3.2%. A lot of fun was had by all.
US stock indices also bounced hugely but were tame in comparison to the spike in German and French stocks. The S&P 500 jumped 2.6%, which left it down 11.2% from its high on January 3. The Nasdaq jumped 3.6%, which left it down 18.2% from its November high.
We got some good news from Amazon afterhours. Amazon shares got hammered down by 26% since their peak in July last year. The company has come under legal scrutiny, and today it emerged that a Congressional House Committee has referred Amazon to the Department of Justice for possible criminal prosecution of the company and some of its executives.
And so Amazon finally did the right thing and afterhours announced a 20-1 stock split and a $10 billion share buyback program to financially engineer itself out of this. And that was great because after the announcement, its shares jumped 6.6%, and now they’re down only 21% from their high.
Asian stocks currently are jumping as well, with the Nikkei up 3.7%, the Shanghai Composite Index up 1.8%, and even the battered Hang Seng Index up 2.0%, leaving it down only 32% from its recent high in February 2021.
Crazy volatility.
Dip-buying after big selloffs is alive and well, following the WOLF STREET dictum: Nothing goes to heck in a straight line. And so is dumping after big run-ups.
Treasury securities had big run-ups when fear drove investors into them, and their prices jumped and their yields fell. Then the dip buyers abandoned ship and Treasury prices fell and yields jumped again, which is what happened over the last couple of days.
Stock market dip buyers swung into action today in a concerted effort, after the selloff since March 2. But since January 3, the S&P 500 index has marked a trail of lower lows and lower highs, punctuated by violent white-knuckle swings intraday and from close to close. Dip buyers that weren’t able to get out fast enough got mauled.
The market faces inflation that has been unleashed by two years of ridiculously massive QE and interest rate repression by the most reckless Fed ever, and by two years of government stimulus of all kinds. Now this inflation is made far worse by the utter chaos in the commodities markets. Double-digit CPI inflation is a possibility for this year.
But the stock market is also facing the end of QE (now), rate hikes (starting March 16), and Quantitative Tightening later this year. As this explosion of inflation across the economy has become a huge political problem for the White House, the Fed may tighten more and shed assets faster than the stock and bond markets, which are still in denial, even dare to think.
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“…though I don’t think talking the price down was the goal; OPEC generally doesn’t talk down the price. That’s the job of US Presidents.”
ROFL
Hahahaha! “A lot of fun was had by all.”
Wolf, on 24th Feb you wrote the article on how oil sagged to $93 and how Gold sagged to $1883. Only after 15 days, now you are writing how Oil sagged to $110 (its now at $117) and Gold is at $2000. This makes me thing that these will jump back pretty soon. Have commodities started hyper inflating? What will happen when Fed announces minor rate hike and all hyper liquidity moves out of stocks and bonds possibly to commodities?
WTI has already jumped “back” to $113 this morning, stocks are already sinking again at the moment. This is driven by speculation and other factors.
We’re not seeing hyperinflation. Just regular high inflation.
If the Fed wants to, it can stop inflation quickly: sell its assets outright at a clip of $500 billion a month and raise interest rates at every meeting and in-between-meeting teleconferences by 100 basis points each — until markets crash 60%+ and people get worried about spending money and businesses get worried about paying higher prices. End of inflation.
But it’s not going to do that. It wants to engineer a “soft landing.” So will see how soft that landing will be. But there will be a landing, as we can already tell.
has there ever been an example in history of central planners engineering a soft landing?
Icarus was trying to engineer a “soft landing”.
The landing might be soft, but the airplane is shot to hell….
There is no such thing as “soft landing.” Too late. Doesn’t matter what the FED zombies do.
1) already in stagflation
2) hyper inflation (if the FED stop or ease raising interest rate)
3) raise rate fast which will cause a recession aka the crash of everything which is the ONLY way to fix this inflation.
Pick your poison.
All this money sloshing around creating wild volatility but the point still stands that the Fed is raising rates. Inflation is proving to be quite sticky. The markets will be jumping all over the place until the excess liquidity is drained. It’s a chaotic system with too much energy and no clear direction of where to go. Thanks for the update Wolf.
The Fed is finally in the same boat as the rest of us. No one want’s to ride these markets out, but what to do and where to go? Inflation has entered double-digit ground any way we want to look at it.
Commodity markets are coming to the forefront and will prove to be just as sham as the stock market, nothing but paper. There is little in the empty warehouses to take delivery on, especially precious metals.
The Fed may finally raise rates .25 then hide under a rock to see what happens.
Spot on. The information signalling in prices was thrown way off by the reckless loose money and credit. This has hit a point where it is wringing itself out, in this confusion and big swings. Many assets (and complacencies) can face a big fast unwind in this environment. It is a reality-test, a stress test and we will see who has been swimming naked. Those dangling their parts with careless risks will be prime snacks for the smart money (or find no bid at all).
But if the Fed bails the alpha predators, as it will feel huge pressure to do, it may mean deeper risks for the whole system. We may smirk about China’s social instability risks, but should consider our own. How wide and deep does the turbulence go in this reset? What political scavengers will appear? The patient is not healthy to begin with, yet is still manic.
“We may smirk about China’s social instability risks, but should consider our own. ”
No kidding. In addition to a fake economy, fake credit reporting, and fake wealth, you can also add fake social stability.
I call it fake because the majority of Americans are only solvent or middle class due to a fake economy with about half the population feeding at the public trough.
“How wide and deep does the turbulence go in this reset?”
A lot deeper than most can conceive but this is because they don’t understand historical context, have a vastly inflated opinion of the government’s ability to prevent declining living standards, don’t or claim not to understand basic math, and seem to think that the US is exempt from the economic reality which applies everywhere else.
The US economy has supposedly been expanding somewhere in the vicinity of 90% of the time since 2000, measured by GDP. If the electorate is so divided during the supposed good times, it should be evident more discord is store later.
America has always needed an enemy,
During the recent peaceful times they
turned on each other.Now they have
an old enemy and they probably will
leave each other alone.
Nope, the upcoming multi-decade major bear market guarantees more discord than ever.
American society is culturally balkanized with limited prospects of finding common ground during actually adverse circumstances.
Economically, expectations are far too high and cannot possibly be satisfied when the economic pie is visibly shrinking.
I have read articles covering survey results where noticeable percentages of respondents claim to expect downward economic mobility but don’t believe it reflects how people will actually respond when they experience it in real time.
It’s one thing to see flat or declining incomes or net worth.
It’s entirely another when your standard of living declines because you can’t buy the goods and
serv ices to which you have become accustomed.
I worry that the money will slosh around until people realize that it is not actually money.
BTW the Fed has not raised anything.
I could see more commodities skyrocketing. Stocks are not a safe haven anymore, down 10% for the year so far. Bonds don’t pay diddly. Doesn’t leave many inflation fighting options.
“legal tender for all debt public and private” it doesn’t say that on bitcoin.
And yet rates are higher after the Fed merely started talking about raising rates. How cool is that?!
No, most “money” is actually someone else’s debt. This includes bank accounts which are actually loans “depositors” have made to the bank.
My general understanding is that a global standoff like this is destructive. Not good for most everyone…
I’m focused on the Nadsaq as a loss leader.
Id go with kathy woods ark funds. Dumbest of the dumb and she’s destined to losing her job within 2 years, although the press release will say she’s leaving to spend more time with her family
You sure about that? Some of these constantly wrong folks can still have their job and be view as some kind of a market maker by lemmings.
You mean Like that revolving glass door called Janice Yellen
On the whole, professional managers add no value as they mostly trade back and forth with overhead cost. She earned a nice salary even when losing money.
What’s left for the investor after paying the CEO, the CFO, the board, the lawyers of a company and then add on the money manager’s asset fees and trading fees and lawyer fees and then the investors pulling out of the fund at the wrong time.
No wonder most would do about as well just buying a CD
Everyone has yacht but the customers.
If press releases were honest:
“… leaving ARK funds to spend more time losing her family’s money.”
:p
“Not good for most everyone…”
It is not supposed to be.
It is good for the 0.01%.
Let me start out by saying I am not a perma bear, nor have I ever made bear predictions. But past bear markets seemed to start with increased volatilty like this. Perhaps after you whipsaw the dip buyers a few times they get gun shy and just sit things out. Also, the hedge funds smell blood especially after market technicals start looking bearish (as they do now). Meaning they go net short.
I’m only 15% in stocks and 15% in bonds with the rest in cash. I’ll sit tight until I see good values. I don’t see how anyone would have confidence when the fed hasn’t even started raising.
I’m very cynical. I don’t think the fed does much until after elections. Maybe a 1/4 point or two just to say they’re doing something.
An old Chinese proverb says may you live in interesting times, at this time, I would prefer it to not be so interesting….
Right?! The tremors underfoot from the worlds economies the and geopolitics is making me just a bit nervous right now. Especially after we have gone through 2 years of political discord over the pandemic…..
Why’s that , Dave ?
I’m curious…
Wolf’s first law of market!
Got em by the balls. What numpty is going to use their position as a pension pot manager to seek market corrections. The losses outweigh the benefits or do they? How fast could a replacement system of exchange be stood up? It already is you say? Interesting
A bank that shall not be named (that caters to the wealthy) this week raised their 30 yr mortgage rate from 2.5% to 2.7%. The money is still flowing for the top 1%… hence the housing market showing no signs of slowing down. Inflation will keep rising until the fed takes it more seriously.
Yup,
I’m not wealthy enough…
Truist cold called me to offer me a refinance at 4.6%…
Yeahhhhhh, no…
At this rate the Fed will delay tightening because Putin, and then inflation is because Putin.
Then all your financial woes from inflation are because Putin, not because Powell.
The ultimate cycle end patsy.
You keep saying Reckless FED,
The R is an F
Feckless… look it up
Learned a new word, thanks.
The personification of Powell. Coddled elite effete (another new word for ya!) bureaucratic people pleaser. The ultimate insecure guy trying to join the club and get little pats on the back. He is the product AND cause of the sort of world the Fed has created. It is a self-referential circular feedback loop by now. Shades of Soviet sclerosis.
Ironic that this milk-toast helped engineer the unhinging of the world.
sorry, pet peeve. milquetoast.
phleep, they are all in it together in that Club.
“ OPEC generally doesn’t talk down the price. That’s the job of US Presidents.”
🏆
I noticed Saudi and UAE not picking up the phone to a Biden Whitehouse but they do take Putin’s calls. He may still win this one economically by crashing the world…without nukes? OPEC+ not going to help. I see food riots in IRAQ already…Turkey 100% inflation… (Arab Spring 2.0)
So 6 months from now – 10 yr Treasury @ 4.5% and the CPI at 10% and Gas at $6.50. Nasdaq at 10,000 and falling.
I am investing in that new E.F.T. long 5.56mm and MRE’s and Water filters.
Elections in 240 days… Methinks we need a change, like an ENEMA?
“ So 6 months from now – 10 yr Treasury @ 4.5% and the CPI at 10% and Gas at $6.50. Nasdaq at 10,000 and falling.“
Where I’m at, that wouldn’t necessarily be a bad thing….
I know some people who deserve some pain….
Amazon is the swap meet of the internet
Amazon is very reliable, I give them that. I ordered some stuff from AliBaba and never got delivery – blocked at US customs. However if you buy the same item from Amazon at 3 X the price – no problem.
Go figure.
Amazon has been pretty good for me…
I’ve saved a lot of money and get pretty much true price discovery…
I’ve dealt with some good businesses and nice people across the country who sell through Amazon…
It’s pretty nice not to have to only rely on a local gouge or have information to negotiate with…
I did dump prime because the benefits didn’t justify the price, especially since I don’t have a EBT card…
Just remember the FEDERAL RESERVE ….
FORCED INVESTORS TO TAKE MORE RISK….as admitted in “The Power of the Federal Reserve” documentary (PBS) and mentioned in the book “Lords of Easy Money.”
When they pounded down the long end with that intention, they also abrogated their THIRD UNMENTIONED mandate…”promote moderate long term interest rates.” (hence the “dual mandate” game”) (1977 Federal Reserve Act)
The wisdom of that mandate was to PREVENT just what they did, and they slipped the duty, ignored the rules.
When they FORCED (Fisher’s word) the investor to take more risk, the Fed altered, on their own….reasonable risk/return calculations and Price to Earnings ratios.
Remember this.
And note, Congress just passed a $1.5 Trillion dollar bill full of non essentials. And all we hear is the the Fed cant raise rates because the service of the debt would be too expensive.
J Powell, take note.
Yes and once you take that position you have to make sure you have their donkey. The Fed put is alive.
Central banks should simply get it over with and reverse their policy mistake NOW: hike rates, reverse QT, and blame the resulting market declines on Putin.
Mean reversal was always going to happen, but they will never get a better chance to deflect the blame.
Good one YS,,, and agree totally dude or dudette!!!
What a really great opportunity to blame the putter and/or anyone and everyone in his locality for the very obvious — to us reading Wolf’s Wonder.
Probably won’t go far enough due to the also very clear ”bribery known as campaign contributions” that continue to flow into USA from almost everywhere, certainly including what was FKA USSR ,,,
W
Wanted to do more, but could not,,,
most likely due to hackers doing their best to stop THE TRUTH(S) from WR???
OK, maybe just targeting me because, after service,,, totally antiwar, including this one???
Covid.
War.
Just one more thing and they’ve got their three.
Then they can let the wheels fall off and call it an act of god.
Trumps a war? Alien invasion
“ Central banks should simply get it over with and reverse their policy mistake NOW”
Y,
I’m sure you meant “ Experimental” policy mistake…
The Fed has disregarded sound policy since Bernanke…
It’s the old, “ since I’m up here and you’re not, guess who’s smarter”….
Correct. They have completely abandoned any policy framework. They are just winging it as they go along.
It happened before Bernanke, under Greenspan.
At minimum when he lowered the FFR to 1% in response to the bursting of the dot.com bubble which contributed mightily to housing bubble 1.
Arguably earlier, with the bailout of LTCM in 1997 or even the 1987 crash right after he became FOMC chairman, though I don’t remember specifics that far back.
Greenspan was responsible for the initial FRB “put” and his monetary policy was looser than any of his predecessors.
I am dubious he will be blamed in the history books since he left in time but he’s the one who initially abandoned any supposedly sound monetary policy.
Why does it appear that the “Conspiracy Theory” (main one) seems to explain all this?
Irony of Irony.
Temperatures are “expected” to drop so far in the Ukraine area that the Russian Tanks may turn into “freezers”.
Shades of Napoleon, and A.H.’s Operation Barbarossa.
Imagine: The Russian Army being stopped by a Russian Winter.
After that, the mud. Oceans of it.
But Russians have been designing equipment for a long time for all that.
They will be stopped by the spring thaw and mudfields like in Belgium in WWI
As well as a few million really pissed off people…
No matter how bad things may be, they can always get worse. One loose nuke and you’ll be reshuffling your portfolios all over again.
My real estate will turn to glass? Sitting here in the cornerstone of the Pacific fleet.
If I was still kicking, a lawn chair on the roof and a return to vodka (after 25 years’ abstention) would be the hedge of the day. Very Buddhist by then.
If you survive,nuclear is a world ending event stocks,money, won’t matter
I would rather die in a nuclear exchange. Seriously.
Especially if you are close to the release. You would be vaporized in a tenth of second. Nothing of you would be found.
7.9% cpi inflation. but don’t worry. the fed is “watching it”
And, it too, is only temporary.
People need to calm down on the fruits and vegetables, the largest increase, stop putting so much avocado on the toast
Shit, I just dropped $68 at the grocery store & most of it was on fruit and veggies.
That’s OK though, as I’m about to use that fuel on my daily bike ride. It is -7C, with a 10 kph WSW wind & partly sunny. A nice day in Minneapolis – “Seasonally Adjusted.”
“Double-digit CPI inflation is a possibility for this year.”
And it will all be conveniently blamed on the conflict in Ukraine rather than on the idiots who brought us to this point and our idiocracy will buy that.
Yes. But today’s 7.9% CPI print cannot yet be blamed on anything other than the “idiots” you mentioned.
sure it can. it won’t be legitimate to blame anything else, but they will say it’s russia, and the low information types will lap it right up.
Perhaps this is true, Lieden has already publicaly stated that today’s inflation is the cost of sanctions. It is a different matter that sanctions were imposed in March, and this is Feb’s CPI !
Do Not Let them get away with more Big Lie BS.
Kevin Hasset (from the previous council of economic advisors) was on today and said Inflation is already at 10% in real time even before figuring in the latest oil spike. We’re looking at double digit inflation as far as the eye can see even with a recession. There’s no investment than can shield you from losing money in this environment. The morons that are in charge of two of the three branches of our government and the Fed have no clue as to what the root cause of the problem is, nor what to do to correct it.
Swamp Creature,
I can see 10% inflation, even 10% CPI, over the next few months. I don’t yet see any sign of a recession. All the signs I see point to businesses and consumers and governments spending like crazy!
Bulk red onions at the produce section of Cub Foods were $1.99/lb two months ago; which seemed like a lot at the time. Last month they hit $2.49/lb. Now @ $2.99/lb.
For one of my staple items, that feels like 50% in a couple months.
All things considered, my quality of life in Minneapolis is darn good. Just a thought …to keep things in perspective.
I heard a few of the financial news talking heads talking about a 3% decline in GDP for the second quarter of 2022. 1st quarter is going to come in at below 1% according to the Atlanta Fed. Add to that the anecdotal evidence you see in the commercial strips and malls with stores going out of business left & right and I see a recession coming if it is not here already. Recession and Inflation = Stagflation.
Swamp Creature,
The Atlanta Fed’s GDPNow is all over the place. It’s so bad that the New York Fed came up with its “Weekly Economic Index” during the pandemic. It predicts GDP very closely. For Q1, it’s now sitting at around 5% annualized. Google it for more info.
That would be correct.
Mid-march…typically a time our
phones ring from early am to late pm.
VERY QUITE.
Backlog ( – cancels being called in ) will be keep us busy into early summer. Diesel has gone up 30+% in under 10 days.
Very happy this time around we are debt free.
Yes, for people who read here who have an inkling of how things work. That’s why I specified the idiocracy as the ones buying it.
I suspect, for instance, that since gasoline prices can increase daily, the average person would probably believe that the announced CPI at any point is a continuously running measure rather a periodic one.
Apparently the WH spokesperson believes they’ll buy that since that’s already their line. And for many she’s probably correct.
Referring just to the IQ bell curve and not the failure to teach even those on the right hand side of the curve the -LEARNED- skill of critical thought and analysis:
“Think of how stupid the average person is, and realize half of them are stupider than that.” – George Carlin
CNN – 10 Mar 2022 – Biden suggests Putin and Russia’s war in Ukraine responsible for soaring inflation in new report
Its just 8% inflation. Sure in 1980 cpi its closer to 12. But its under control. Everything is great.
It’s kind of wickedly fun to watch, at the moment. It is radical rebalancing in an atmosphere of thick fog and wild vortices. Sort of chutes and ladders. Sort of a tragic comic opera and rugby scrum all at once. One can superimpose all sorts of conspiracy theories or whatever template one likes. All the really goofy ones can be sort of made to fit.
“There are decades where nothing happens; and there are weeks where decades happen.” — Lenin
Also Wolf, besides AMZN stock split, their maximum base wage changed last month.
Re New York Post..
“Amazon is more than doubling the maximum base salary for corporate employees to $350,000 due to a “particularly competitive labor market,” the company said in an internal memo on Monday.
Amazon’s maximum base salary for most corporate employees in US cities had previously been $160,000, with an extra bump $25,000 for workers based in San Francisco or New York City.”
that was always nonsense. i have friends who work in upperish positions in amazon. they kept the base for everyone at $160k, but people got bonuses and stock incentives that made up for it. according to these friends, the total comp isn’t changing that drastically.
Restroom breaks is part of their bonus 😉
Oil ,“ bar a German & French, AKA the Fools of Europe & cheese eating surrender monkeys “ 180 degrees turn around on their uskraninan democracy BS, will hit $150 and be on its way to test $170 by June! If Not sooner.
Oil inventories are low, the wack that the US economy will suffer will spill catastrophe. Not even Mr reluctant With his hastened turnaround on the $1.5T bill will save these clown’s backside now.
Venezuela’s oil industry is decimated and cannot be revived by decrees and posturing.
Add to the above the fancy calls from some clownish Democrats to impose an excess profit tax on the oil industry ( yee haa, you’re welcome to join me in a big loud LOL!!). Imagine the amount of confidence that kind of malignant spouting does to the US’s oil cohorts???!!!
Though I believe they will join the party once oil hits $150 albeit “ reluctantly 🤣
The hurricane season, the unfunded multitudes of Government programs, yet somehow we finding money to support the destruction of other countries’s economies?!!
If this is NOT SATIRE AT IT’s WORST? what could it be?
“CPI Shoots Higher To 7.9%”
And it would be even higher if they hadn’t recently increased the weighting of used car prices which had nowhere to go but down… very clever.
Winston,
Hahahaha, nope, opposite.
Today’s used vehicle CPI for February = 41.2%, second highest ever, behind only June 2021
December (before weights changed) used vehicle CPI = 37.2%
Weights:
February used vehicle weight: 4.170%
December used vehicle weight: 3.419%
So today’s 7.9% CPI print would have been LOWER if they had not increased the weight of that 41.2% print.
As long as used vehicle CPI (Feb = 41.2%) stays higher than the headline CPI (Feb = 7.9%), a higher weight on used vehicles will INCREASE the overall CPI.
Conversely, if used vehicle CPI drops to 7% and overall CPI rises to 10%, then the higher weight of used vehicle CPI (at 7%) will reduce overall CPI (at 10%). This might happen in the future, but not over the next few months.
Seems the markets are ready to turn, and the economy follows, and then meekly, the American consumer. After several decades of sub par global growth the catalysts for a rebound are in place. Without Russia OPEC plus is a minus, and renewables offset new demand pressures. Financial technology is light years ahead of where it was in the 30s, or the 80s. We’re going to need a lot more immigrants.
“After several decades of sub par global growth the catalysts for a rebound are in place.”
What catalysts?
More debt and “printing”?
It will take a lot more than cheaper oil and natural gas prices to do it.
Algoes likely playing a large role in that oil flash crash. Am not sure anyone is really aware of all that goes into those black boxes?
With Zirp there is so much levered gambling going on that an unexpected event blows things up. The fact of life is there are always unexpected events and you shouldn’t get yourself in that situation. But the big and connected have the Fed put.