Powell Pushes Dow Back Into Bull Market As Dollar Crashes To Worst Month In 13 Years

It’s been a tempestuous month as China COVID restrictions, US inflation signals, and Fed statements and jawboning sparked various pops and drops in equities, bonds, rate-hike odds, and commodities.

However, before we get to the monthly summaries, today’s market moves are worth noting.

Early strength in futs on more positive rhetoric on China COVID restrictions lifted… Ugly housing and PMI stalled stocks into the open… Then Andy Jassy comments smashed markets lower… and then stocks rebounded on rail strike aversion by Congress…

And then stocks went into turbo mode as Powell offered some hints at Fed rate-hike-pace moderation (ignoring the fact that Powell also said that terminal rates could be higher and higher restrictive policy needs to stay in place for longer noting that history cautions against prematurely loosening policy).

The Nasdaq ripped over 4% on the day, Dow managed 2% gains while the S&P rose 3%…

Thanks to a huge short-squeeze…

Source: Bloomberg

Today’s meltup was brought to you by 0DTE SPY traders…

So far 5% of SPX call volume is 0DTE, with about 40% of SPY calls.

Both SPX & SPY call volumes in 0DTE drop off sharply above 405/4050 pic.twitter.com/QvjbZNrU4c

— SpotGamma (@spotgamma) November 30, 2022

Interestingly VIX could not break below 20 as the S&P surged late on…

All of which sent the S&P back above its 200DMA…

And today’s meltup pushed The Dow up over 20% from its early October lows – a new bull market for the Industrial Average…

All of which is odd because, as Bloomberg Chief US Economist Anna Wong: “Powell has sounded more hawkish than the typical FOMC participant.”

“Notably, he appears less confident than some in the November FOMC minutes that wage growth has cooled. He hinted labor supply is unlikely grow anytime soon, and the Fed will have to bring down demand or raise the unemployment rate to slow wage growth. This speech confirms our view that Powell is on the hawkish end of the FOMC spectrum — possibly more hawkish than the median participant.”

Before the bell, none other than Jim Cramer told his co-anchors on CNBC that Q3 GDP gives Fed Chair Powell every reason to be hawkish…

However, the market certainly smelled a dove, pushing terminal rate expectations back below 5.00% and raising expectations for rate-cuts in H2 2023 (despite Powell saying the exact opposite). For context today saw 20bps of rate-hikes cut off the Fed’s terminal rate and 12bps of rate-cuts added to H2 2023 expectations…

Source: Bloomberg

All of which left rate-trajectory expectations basically unchanged on the month and since pre-FOMC

Source: Bloomberg

Rate-hike odds for December and February dropped dovishly with 50bps basically locked in for Dec and only a 45% chance of a 50bps hike in Feb now…

Source: Bloomberg

We do note that the market had traded ‘hawkishly’ (on multiple hawkish Fed speakers) into today’s Powell speech…

Bond yields crashed on Powell after spiking overnight on hopes that China will be coming back soon with the short-end dramatically outperforming (2Y -10bps, 30Y -1bps)…

Source: Bloomberg

The Dollar also plunged after rallying overnight…

Source: Bloomberg

And Gold spiked after puking overnight…

Source: Bloomberg

But on the month, the dollar is dramatically lower. In fact this is the worst month for the Bloomberg Dollar Index since May 2009…

Source: Bloomberg

Treasury yields were lower on the month (except 2Y which ended unchanged after today’s post-Powell plunge) with the rest of the curve all down around 35bps in Nov…

Source: Bloomberg

Today’s panic-bid dragged all the US major equity markets into the green for the month with the Russell 2000 the laggard, Dow the leader…

Source: Bloomberg

Cryptos had an ugly month with FTX clubbing everything like a baby seal. Solana was crushed, Bitcoin and Ethereum plunged, but Litecoin managed gains…

Source: Bloomberg

Bitcoin rallied back above $17,000 today, its highest in 3 weeks…

Source: Bloomberg

Commodities were mixed with crude plunging and silver soaring, gold and copper also rallied on the month…

Source: Bloomberg

WTI is down 5 of the last 6 months, briefly dipping into the red for the year before bouncing in the last couple of days…

Source: Bloomberg

Gold had its best month since July 2020…

Source: Bloomberg

Silver soared back above $22 this month, its best month since July 2020…

Source: Bloomberg

Finally, what happens next?

Source: Bloomberg

Will Powell stand in the way?