1. Moving the markets

After the 4-day winning streak, we saw a slight pullback in the major indexes, especially in the tech sector, with the Nasdaq giving back a modest -0.70%.  However, the main action happened in the bond market.

Following the recent rise in yields towards the psychologically important 3% level, for the 10-year bond, the rally turned around suddenly with yields flash-crashing 10-12 basis points, as this chart shows. That’s a huge move forcing those with short positions to run for cover.

With Italy being out of the limelight today, Brazil took its place in the spotlight. Turmoil best describes the events of the day, with the Brazilian Real crashing to a new low as a $3 billion-dollar intervention failed to prop up markets. It sure looked like there was an “unmistakable relationship between the timing of the Real’s plunge and the collapse in Treasury yields,” according to ZeroHedge.

There are so many hotspots in the world right now with any of them being able to affect markets worldwide. It’s somewhat surprising that the major indexes continue to climb a wall worry, in the process ignoring any theme that can’t be interpreted as bullish.

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1. Moving the markets

After an early morning pullback, the floodgates opened with buyers appearing in full force and pushing the major indexes higher with the Nasdaq closing at another record, while the Dow sported its best day in almost 2 months.

Since there were no news to justify the run-up, the VIX was pushed down to an 11 handle thereby throwing a solid assist to keep the bullish movement going. Remember, a lower VIX supports equities and vice versa. On the other hand, this reckless exuberance is not shared by those who allegedly know best, namely the Smart Money. This chart makes that abundantly clear.

Despite the Nasdaq’s solid performance (+0.67%), the Financials did even better with XLF adding +1.86%. A higher 10-year bond yield boosted that sector along with encouraging remarks from the ECB regarding them being on track to end their asset purchases.

The ongoing trade battle, Italian political and banking tensions along with Deutsche Bank’s financial issues were pretty much ignored, as the bulls continued to have it their way for the 4^th day straight day.

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1. Moving the markets

Markets behaved today as if a world of worry had simply disappeared. Still on a positive high from Friday’s jobs reports, upward momentum led to another green session for the major indexes. The main driver was the tech sector, which posted its first record close since the middle of March.

None of the weekend news seemed to matter, or were simply ignored, as trade talks between U.S. and China broke down, and a host of European finance ministers paraded around to express disappointment over Trump’s decision to burden the major allies with stiff tariffs.

Spiking interest rates did not matter as the 10-year bond yield jumped 5 basis points to close at 2.94%. Never mind that factory orders slumped -0.8% and had their worst April since 2012. While the March number was upwardly revised, year over year the growth trend slowed down.

Today was all about exposure to risk assets and focus on the upcoming Central Bank meeting next week, where a rate hike is pretty much a foregone conclusion. The main debate remains whether or not the Fed will hold off with a fourth increase this year.

Historically June is usually not a good month for equities. Over the past 2 decades, June has been the fourth-worst month of the year for the Dow and S&P 500. We’ll have to see if it’s different this time.

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