[Chart courtesy of MarketWatch.com]

1. Moving the markets

Friday’s drubbing was followed by an ugly overnight futures session, which already pointed towards another knock-down of the buy-and-hold crowd and the dip-buyers.

Things got worse as the fifth largest ‘sell program’ in history was launched, as ZeroHedge elaborated, and wreaked havoc with the markets, while sending the S&P 500 back into official Wall Street bear market territory, which the index had touched a few weeks ago.

It was a Puke-A-Thon at its finest with Bloomberg offering this explanation:

Sell programs of this size are typically no single events. They tend to happen in clusters, and that probably means stocks might be in store for bigger losses.

Bond yields surged, as the major indexes got clobbered with the S&P 500 losing almost 4%, but the Nasdaq fared worse by giving up 4.68%. The 10-year ripped higher by an amazing 22 basis points to close at 2.389%! For context, the 2-year has now reached its highest yield since 2008.

All asset classes were clubbed, and even gold could not escape the carnage, as a host of news combined to hand the bears a chest-pounding win. ZH noted that event risk anxiety ahead of the FOMC meeting combined with Option Expiration technicals ($3.4 trillion option expirations) and European ‘fragmentation’ fears, along with the usual political and economic worries, were simply too much for traders to handle.

Financial conditions are tightening again and are zigzagging in tune with daily news as to the Fed’s next cause of action. This was not helped by sudden increase in expectations that the Fed might hike 75 bps instead of the assumed 50 bps when they meet this Wednesday.

As a result of soaring bond yields, mortgage rates rose and topped 6%, the US Dollar reversed from its recent sell-off and raced higher, while gold suffered from higher rates and gave back its $1,850 level.

Even though, this bear market may present us with some bounce-backs, the major trend remains lower, and in my advisor practice, we continue to be out of equities but have some limited exposure in selected sector ETFs.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The roller coaster ride continued, as yesterday’s rebound vanished in a hurry, with the major indexes giving back more than they gained in the prior session. Bonds reversed Tuesday’s yield slippage with yields rising and the 10-year reclaiming its 3% level by closing at 3.03%.

Updates and warnings from major companies (Credit Suisse, Intel) contributed to equity weakness amid signs that economic growth is not what it was cracked up to be. In other words, we are slowing down with the Stagflation scenario becoming more real every day.

Things are starting to affect the housing market, because mortgage demand hit its lowest level in 22 years, as per the Mortgage Bankers Association. A rally in Crude Oil to over $122 only created more anxiety, but Natural Gas plunged due to a small terminal explosion. ZH explained that less exports means more domestic supply, hence the sell off. The reverse happened in Europe, as their supplies were cut and prices subsequently rose.

On deck for Friday is the highly anticipated CPI number for May. It’s reading could influence the path of Fed policy in terms of frequency (a potential pause) and magnitude (0.5% increments) and therefore affect market direction as well.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The major indexes were subdued early in the session, because Target’s profit warning sent equities into the red. After some bobbing and weaving, momentum turned positive, as dip buyers and a short squeeze combined forces to produce a green close to.

A big assist came from the bond market, after yields retreated with the 10-year losing 5.6 basis points and closing a tad below the much-feared 3% level. Any close above it appears to wreak havoc with equities, while any close below it supports bullish sentiment.

Traders are still anxiously debating whether the recent bounce is a bear market rally, or if we have seen the bottom of this year’s sell-off with a new bullish run now on deck. Personally, I think we may see a little more push to the upside, yet in limited fashion, after which new lows for the year will be made.

Econ data painted a different reality picture then that of equities. First, as ZH reported, the World Bank downgraded global economic growth and warned of stagflationary pressures building.

This was followed by the Atlanta Fed downgrading US economic growth to 0.9% from a 1.3% level just seven days ago. Way to go! Quipped ZeroHedge: Finally, today was a great day for buying stocks…