On the first trading day of the last super central bank week in 2023, the financial market seemed to be experiencing a surge of undercurrents beneath the calm surface. Looking at the overnight trend of cross asset classes, there are undoubtedly many things worth pondering
On this trading day, where both US stocks and bonds closed with little volatility, there were at least two unusual features:
One reason is that this is a rare trading day where the seven major US stocks have almost universally fallen, but both the S&P 500 index and the Nasdaq have closed higher;
Secondly, behind the overall flat fluctuations in the stock and bond markets, Bitcoin and gold both experienced significant declines at the beginning of this week, seemingly sensing the danger of this super week ahead of schedule.
Considering that tonight the US Department of Labor will release the highly anticipated US November CPI data, a prelude to the Federal Reserve's interest rate decision is officially underway. What does the difference between the "dynamic" and "static", "sideways" and "sharp decline" in the market actually mean? Have some sharp market professionals started to proactively plan for the upcoming series of macro risk events? A series of questions are undoubtedly worth exploring by investors
Is the first day of Super Week actually "not ordinary"?
For many Chinese investors, if they only glance at the overall closing performance of the US stock and bond market last night after waking up, then there is undoubtedly nothing special about it.
At the beginning of this week, the three major stock indexes in the United States welcomed another "sunny day" - the S&P 500 index rose 0.4%, the Dow Jones index also rose 0.4%, and the Nasdaq Composite index rose 0.2%. Although the gains are generally not significant, this is the third consecutive day of gains for the three major stock indexes, and the S&P 500 index has set a new intraday and closing high since 2023.
Meanwhile, the sell-off storm experienced by US Treasury bonds after last Friday's non farm payroll seems to have temporarily halted at the beginning of this week. The yield of US Treasury bonds with different maturities generally did not change much on Monday, and the auction of three-year and 10-year government bonds on that day was lackluster. As of the New York session, the 2-year US Treasury yield fell 1.3 basis points to 4.714%, the 5-year US Treasury yield increased 0.3 basis points to 4.247%, the 10-year US Treasury yield increased 0.5 basis points to 4.237%, and the 30-year US Treasury yield increased 1.8 basis points to 4.329%.
Before a series of risk events hit later this week, the wait-and-see sentiment and sideways trend exhibited by the stock and bond markets were actually what people could expect - the main market catalysts for this week included Tuesday's US inflation data and Wednesday's Federal Reserve policy statement, which will greatly affect investors' expectations of interest rate trends.
Ken Polcari, Managing Partner of Kace Capital Advisors, said, "I don't think there's any reason to react before these events, and now it's just a wait-and-see situation. The trend is that it will continue to rise."
However, it is quite interesting that, aside from the overall performance of the stock and bond markets, the overnight global market is actually not as "calm". When reviewing last night's market trends, the well-known financial blog website Zerohidge highlighted three types of underlying assets in its title: Bitcoin, large technology stocks, and gold.
Does anyone smell the danger?
The most volatile market last night was undoubtedly Bitcoin. On Monday in the US market, the price of Bitcoin briefly fell to a low of $40228, dropping more than 7% in the past 24 hours, and the price has quickly moved away from the previously approaching $44000 mark.
Meanwhile, almost all cryptocurrencies have experienced a sharp decline.
Although the reason for the sudden decline in cryptocurrencies is still unclear, many cryptocurrency industry insiders speculate that it may be related to profit taking sentiment before the series of macro news events that began on Tuesday. Considering that when the expectation of the Federal Reserve's interest rate cut heated up earlier, currency traders had already been at the forefront of cross asset similar rebound camps, so the underlying message behind last night's sharp decline cannot be ignored.
At the same time, while the US stock market reached new highs overnight, it also revealed some unsettling phenomena.
According to Dow Jones data, the stock prices of Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta - the seven giants of the US stock market - all fell at least 0.8% overnight. Among them, Meta led the decline, falling 2.2%. Regarding this, the commentator The Kobeissi Letter lamented that the total market value of the "Big Seven" has lost over $30 billion, but the S&P 500 index still reached a new high in 2023. This is the first time this year that the stock prices of the "Big Seven" have dropped significantly, while the S&P 500 index has not experienced a significant decline.
However, the institution also reminds that in the long run, it is difficult to see a market's long-term rise without being driven by these technology cap stocks.
Finally, at the beginning of this week, there was another type of asset that had been popular in the past few weeks - gold - that experienced a significant decline. The spot gold price fell to a low of $1975.83 on Monday, the lowest level since November 21st. At present, while moving away from the high of nearly $2150 hit earlier this month, gold prices have even fallen below the $2000 mark.
Although the logic behind the movements of Bitcoin, large technology stocks, and gold may not be entirely consistent, there is no doubt that they all share one thing in common: if the Fed's hawkish stance this week exceeds market expectations, or in other words, if the Fed's rate cut next year does not meet the market's earlier dovish bets, then these three types of assets will all be the main targets facing pressure.
Before tonight's US CPI hits the first shot of this Super Week, investors may need to quickly "fasten their seat belts"