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So much for the 'Bernanke put': Traders fume at dovish Fed

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Oh boy. Who would have thought Federal Reserve chairman Ben Bernanke's comment that "a highly accommodative policy is needed for the foreseeable future," would cause this kind of rally in stocks and bonds?

Certainly not me. He's said that before, after all. And just because he is dovish on raising rates, it doesn't mean he is dovish on tapering of bond purchases.

Regardless: there are an awful lot of angry (and broke) bond traders out there in the wake of those comments.

Why? Because Wall Street has been aggressively short bonds. As a result, their positions got blown out by Bernanke after-hours, no less, a time when it's much more difficult to cover positions.

One furious trader told me he lost $6,000 covering his bond shorts. That loss, he added, would have been far greater had he not been sitting at his trading desk listening to Bernanke and not reacted instantly. "If it was a few seconds later, I would have lost $25,000 instead of $6,000," he said. He has a friend who has lost so much money overnight he won't even pick up the phone.

We'll get a chance to watch the same see-saw next week, when Mr. Bernanke gives his semi-annual testimony in Congress.

Elsewhere:

1) while U.S. stock indices are sitting at historic highs, money is continuing to leave emerging market countries...big time. Emerging market stocks are up this morning in the first significant rally for a while. Still, there has been enormous damage already done.

Some of this is due to worries over a China slowdown, but the real move began when Bernanke first hinted at tapering on May 22nd. Some of the Fed's ocean of liquidity clearly found its way into emerging markets, and that is now coming out.

Here's the performance of a few major emerging market ETFs since May 1:

Turkey -25%

Peru -21%

Thailand -21%

Philippines -19%

Meanwhile, two emerging market central banks raised rates: Brazil raised from 8 to 8.5 percent, and Indonesia hiked from 6 to 6.5 percentall in an effort to stem the flow of money out, so far to no avail.

2) June Retail Sales up 4.1 percent, according to RetailMetrics, strongest since January, again indicating that retail continues to hold up. Standouts were Costco, where sales rose 6 percent, discounters like Fred's and Steinmart and PriceSmart were also strong.

The one downside standout was L Brands, which had a flat comp, below expectations of a gain of 2 percent. This could be setting up for a decent back to school shopping season, which starts in 3 weeks (wait, didn't the summer just start?)

3) Bulls are on the move: the individual investor measurement of sentiment, the AAII survey, up strongly this week, to 48.9 from 42.0, the highest since January 2013. Bears fell to 18.3 from 23.8, the lowest since January 2012.

By CNBC's Bob Pisani

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

Wall Street