Sell in May and Stay Away

Dow Dumps 270 Points Intraday To Biggest 2-Week Drop In Six Months

The Dow Jones Utility Index is down 35% in the last two weeks – the largest drop since March 2009. Across the board, what looked like being a normal BTFD day around midday, equity markets were monkey-hammered lowered with the S&P 500’s worst 2-week run in 6 months. The Dow dropped over 270 points intraday (and 400 from its Monday highs) – attributed to a large month-end sell-side imbalance. Equity markets appear to be playing catch-down to credit’s warning messages (though stocks are only down 1% from Friday’s close, it feels like more as they are -2.5% to 3% from the highs). JPY strengthened into the equity sell-off and commodities all legged lower (with WTI -2.5% on the week and Gold unch) even as the USD weakened 0.5% on the week. The reality of the one-way trade was very evident. Treasuries came well off their worst levels of the day but remain 11-14bps higher in yield on the week. VIX, which had also been sending its warning messages, smashed 1.75 vols higher to 16.25%. It seems a lot will be reflecting on the Dow/NKY convergence and the behavior in Japan this week as they note there was no bounce at all in today’s closing crash.

Dow down over 400 points from its Monday highs…

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