Summing up Mainstream media today...

Where to start...

Bonds - Good!

Stocks - Bad!

Commodities - Ugly!

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Everything was red in equity index land today... Trannies worst day since January

Stocks are all red for the week... Dow is down over 400 points from Monday's highs back below its 200DMA; S&P 500 cash is back below its 50DMA; and Russell 2000 broke below its 50 & 100DMA

Financials have given up their earlier week gains (as rates flatten) and only builders remain green on the week...

Leaving The Dow red for 2015...

52-Week Lows are at their highest since 2014...

On the week, the Treasury complex is seeing major flattening as the long-end collapses while short-end lifts on rate hike expectations...

With 30Y retracing all "Greece is fixed" weakness...

With 2s30s near 3 month flats...

Maybe all that NIM hope is overprices after all...

The US Dollar leaked lower on the day as EUR strengthened and cable weakened...

Summing up th edetails across the FX space (courtesy of ForexLive)

The dollar was mixed in trading today. It rose against the GBP and AUD, fell against the EUR NZD. and JPY, and was little changed vs the CAD and CHF.

The cable was the big loser on the day and is closing near low levels after weak retail sales took some of the jubilance from thoughts of a quicker tightening.  BOE McCafferty did comment, however, that the BOE must be careful not to keeps rates too low for too long. EURGBP surged higher in trading today.

In Canada, stronger than expected retail sales sent the USDCAD sharply lower, but oil price continued to fall  with WTI crude down 1.14% on the day at the close.  What was gained in the London morning session for the loonie (and after the release of the data) was taken all back by the close.

The EURUSD rallied to new week highs (highest level since July 15th). The pair did find sellers against technical levels defined by the 50% retracement and the 100 day MA at the 1.1011 and 1.1000 respectively.

Twenty-four hours after the RBNZ cut their rate by 25 basis points, the NZDUSD is ending the day up from 5 pm close at 0.6560 but off the London session highs at 0.6694. The pair is ending the NY session testing the 200 hour MA at the 0.6606 level.  Disappointment from not cutting 50 basis points sent the pair higher but lower rates are still expected between now and the end of the year.

But that did nothing to support commodities...

Copper now at 6 year lows

And front-month crude getting close to cycle lows...

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Scotiabank's Guy Haselmann provides some more ominous color...

I believe the plunging of the commodity complex is telling us that the China economy could be imploding.  Problems stemming from China are spreading further into more sectors and markets (various high yield sectors, emerging markets, EM and commodity currencies).

As I wrote in my note Tuesday (Too Much of Everything), Zero interest rates have contributed to over-production, pressuring consumer prices lower.  Certainly, borrowing in the energy sector contributed to the over-supply of oil and look what has happened in that sector.   Now, weakening demand from China is accelerating the decent in most commodities.  Budgets of EM supplier-countries and commodity exporters are being materially impacted.  

As commodities fall, the FOMC says that inflation targets are harder to obtain, leading to a self-perpetuating  belief that continued cheap money is needed. 

Yet, claims fell to the lowest level since 1973, housing is strong, and auto sales are back to almost 17mm units (etc).  Clearly, the Fed has gotten itself into a difficult position.   By not lifting-off and taking their medicine in 2014 – market imbalances today are now bigger and the consequences greater.

China is unfolding as the most important story of 2015 for markets. Stay alert.   Long-dated US Treasuries remain attractive and good place to hid.

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Charts: Bloomberg

Bonus Chart: Protection costs are dramatically diverging between credit and stocks...

As Bloomberg notes, the last time the VIX diverged from high-yield CDS this much was in August 2013, when investors were anticipating the Federal Reserve would start reducing its quantitative easing program. The equity volatility gauge jumped more than 70 percent in the next two months as the S&P 500 lost as much as 4.6 percent.

Bonus Bonus Chart: The real fear index is the most complacent since before Lehman... (details on Implied Correlation here)