Stocks Suffer 'Shocking' Down Week As Fed Balance Sheet Unexpectedly Shrinks

By Tyler Durden of ZeroHedge

Friday, November 22, 2019 5:27 PM EDT

In case you wondered why stocks fell this week - after six straight weeks higher in the face of disappointing economic data - it's simple... The Fed balance sheet unexpectedly contracted for the first time in weeks.

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Source: Bloomberg

It's been a mad week...

The market-implied odds of a US-China trade deal slipped back below 50% today...

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Source: Bloomberg

Chinese markets were mixed with ChiNext and Shenzhen managing to cling to gains but the rest in the red as trade-deal hope faded...

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Source: Bloomberg

As election uncertainty fades (Johnson looks like winning by a landslide), UK's FTSE was the only major EU stock market green this week...

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Source: Bloomberg

After six straight weeks higher (7 for Nasdaq), US equity markets stunningly closed red for the week... DO NOT PANIC!

Trannies were the week's laggards with the rest of the US majors all down around 0.4% on the week...

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Stocks were shockingly red this week despite an epic short-squeeze today...

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Source: Bloomberg

As Nomura's Charlie McElligott warned (and nailed perfectly), gamma around S&P 3,100 was all that mattered this week for price action...

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Credit continues to decouple from stocks since the start of November...

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Source: Bloomberg

A mixed picture this week with the short-end of the curve higher in yield and long-end lower...

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Source: Bloomberg

30Y Yields have collapsed in the last two weeks, back down to key support once again...

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Source: Bloomberg

Additionally, the 'breakout' of the year's downtrend channel in 10Y has failed to spark more selling (and it is hovering at the intersection of critical technical levels)...

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Source: Bloomberg

The Treasury curve (3m10Y) has flattened a dramatic 20bps in the last two weeks (after 5 straight weeks of steepening), the biggest such flattening since May...

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Source: Bloomberg

And the 2s10s curve has broken down from its uptrend channel...

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Source: Bloomberg

As BMO's rates-desk notes:

If the 2s/10s curve is unable to steepen above the YTD high of 30.8 bp or reinvert below the -6.6 bp low, this 37.4 bp zone will be the tightest annual rage in history. A fact all the more remarkable given that 10s themselves have traded in a 137 bp range. At a high level this indicates that a shift in the structural level of interest rates has been the dominating theme in 2019. Lower for longer reflecting middling growth prospects and concerns about monetary policy effectiveness are powerful influences in the background; the past 24 hours have been a decent case in point.

And Treasury 'VIX' is testing back to its lowest since May...

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