It used to be common knowledge that bonds only cared about the Fed. So where did that trade go so wrong?» Read More
A swath of U.S. states are getting a big break at the pump, website GasBuddy said on Monday, with retail prices dipping below $3 a gallon for the first time in nearly a year in some areas.
According to GasBuddy—a site where motorists around the country can post and view local gas prices—16 states are seeing major gas price relief. Among them are Texas, Missouri, New Jersey, Oklahoma, Louisiana and Florida.
In rural Texas, some lucky motorists are getting the rock-bottom price of $2.70 per gallon.
The site added that a handful of other states, including Alabama, Ohio, Pennsylvania and North Carolina, could see similar relief later this week.
Gold dropped $25 in two minutes Friday morning following what appeared to be a single massive sell order, and professional traders are now pronouncing the sale a deliberate attempt to manipulate the market.
At 8:42 a.m. ET Friday morning, a firm appeared to sell 5,000 gold futures contracts "at the market," meaning at whatever price was available. The massive order was more than the market could take at once and led the CME to automatically halt trading for 10 seconds.
Eric Hunsader of Nanex told CNBC.com on Friday that 2,700 contracts were sold, which triggered the halt, and that the remaining 2,300 were sold once the market resumed trading.
(Read more: Gold's plunge blamed on one massive sell order)
Since one futures contract controls 100 troy ounces of gold, and each troy ounce was worth $1,285 at the time of the sale, this party was selling some $640 million worth of gold in one shot. And it overwhelmed the liquidity in the market.
"Anyone with knowledge of the size and volume in the market would absolutely never, ever place a 5,000 [contract] sell [order] at market, because you could not estimate the offset price," said iiTrader CEO Rich Ilczyszyn.
If Ilczyszyn's firm were placing the order, he said, "we generally would piece the order in to work a better price." That's why he believes the trade was "an error."
But Euro Pacific Capital CEO Peter Schiff, a longtime gold fan, infers darker motives.
"Someone's obviously trying to move the market lower," he told CNBC.com. "A legitimate seller would work a limit over time to get a good price."
Jim Iuorio, managing director at TJM Institutional Services, sees similarities between what happened to gold Friday and what happened Sept. 12, when a big gold sale at 2:54 a.m. ET similarly caused a trading halt and hurt the market.
"There is only one conclusion that seems logical regarding Friday's gold trade and the one from a month ago, and that's that they were designed to manipulate prices," Iuorio said. "They were slightly different, in that the one from a month ago was done when the market was illiquid in order to get the biggest prices movement. Friday's was done around the opening to ensure that there was maximum visibility."
Like the stock market, gold is expected react sharply to the outcome of the debt ceiling impasse. But unlike stocks, gold tends to do well in fear-inducing situations. So if there is no deal on the debt ceiling over the next few days, then gold will rise—but if we get a deal before we hit the ceiling, then gold will drop.
Gold broke major support levels in early Friday trading but failed to follow through to the downside after putting in a low of $1,259.60—the lowest level since July. Investors showed support for the metal as Washington headed into a deadlock, but after it failed to rally when it had every reason to do so, investors fled to better-performing assets.
(Read more: Gold's plunge blamed on one massive sell order)
A huge week for earning is coming up, with companies as diverse as Coca-Cola, Bank of America, Google and GE revealing how much they earned in the third quarter. And some traders worry that the results won't be good.
"To me, 'negative' is probably the word that comes to mind when I look through this week," said JIm Iuorio, managing director of TJM Institutional Services and a CNBC contributor.
As of Friday, 31 S&P 500 companies have reported, and 55 percent of those have beaten earnings estimates, according to Thomson Reuters I/B/E/S. On the revenue side, 52 percent have beaten estimates.
And in fact, despite concerns about revenue and earnings growth, S&P 500 operating earnings per share for the third quarter are expected to post a record—and the third record in a row, according to S&P's Howard Silverblatt.
As Silverblatt writes: "We will all, legitimately, complain about slow earnings and sales growth, but in the end Q3 may set a record, which is difficult to argue with."
Gold lost $25 in two minutes on Friday morning, as the gold market experience a massive surge in volume that triggered a halt in the middle of the plunge. The move took gold down to a three-month low, and was felt across the commodity markets. And incredibly, a single sell order could be the culprit.
"It appears to have been an order to sell 5,000 gold futures contracts at market," Eric Hunsader of Nanex told CNBC.com, when asked to explain the swift move at 8:42 a.m. EDT. "About 2,700 went off and tripped the stop logic, halting gold futures for 10 seconds while liquidity replenished. When enough liquidity returned (after 10 seconds), the balance of about 2,300 completed."
Fed Chairman Ben Bernanke will not taper the Fed's bond buying before his term ends in January, says the head of U.S. rates strategy at Societe Generale. In fact, Mary Beth Fisher says, the Fed is more likely to increase its quantitative easing program than to decrease it.
And it could all come down to internal politics, Fisher said Thursday on CNBC's "Futures Now."
"I think Bernanke was a little bit more moderate than [Janet] Yellen and [William] Dudley and [Charles] Evans and clearly [James] Bullard in this situation, with inflation very low," Fisher said, referring to other members of the Federal Open Market Committee. Fisher finds it unlikely that Bernanke would "start tapering when he knows that that core of the committee, whose new leader was about to come out of it, were against the idea."
In fact, the strategist suggests that Fed Vice Chair Yellen's then-impending nomination for Fed chair could have been behind the Fed's decision not taper in September, which took markets by surprise.
President Barack Obama's choice of Janet Yellen to head the Federal Reserve was surely bolstered by the fact that her concerns about unemployment outweigh her concerns about inflation. It must have gratified him, then, to learn that her most famous theory attempts to pinpoint the specific cause behind unemployment.
Co-written with her husband, Nobel-winning economist George Akerlof, Yellen's most widely cited paper is borne out of a simple premise: "if people do not get what they think they deserve, they get angry." Yellen and Akerlof go on to argue that workers who receive less than what they perceive to be a fair wage will purposely work less hard as a way to take revenge on their employer. And the worse they are paid, the less hard they will work. Or, as the paper puts it, "workers proportionally withdraw effort as their actual wage falls short of their fair wage."
In the 1990 paper, the economists christen their theory "the fair wage-effort hypothesis," and go on to explain why the phenomenon could explain unemployment.
(Read more: Stocks shrug off Yellen, so I'm getting short: Pro)
But before that is elucidated, it is important to understand that under the admittedly "rudimentary model" used by these economists, unemployment is a bit of a riddle. After all, if the cost of hiring a worker is greater than the value that worker adds, then firms will hire no one.
In that scenario, "the demand for labor is zero, and the unemployment rate is unity," (meaning one, or 100 percent). On the other hand, if there is unemployment, then a given firm could "set its wage at any level." In that case, a given firm would choose a wage that maximizes value—and once they do so, "every firm should hire an infinite amount of labor," which would solve the problem of unemployment.
However, Akerlof and Yellen submit that since people do better work when paid more, firms pay workers a wage that workers consider fair. And since this "fair wage" is higher than the "market-clearing wage" that would lead to an "excess demand for labor," unemployment results. In this way, "this hypothesis explains the existence of unemployment," the economists declare.
That paper, entitled "The Fair-Wage Effort Hypothesis and Unemployment," has been cited in more than 300 academic articles, and has had a huge impact on the field of economics. "It's a very influential paper," said economics professor John Burger of Loyola University Maryland, who cited it in a recent paper of his own.
As recently as Tuesday, I thought news of a Janet Yellen appointment for Federal Reserve chair would go a long way toward reversing stock market weakness. But though President Obama is due to nominate Yellen for the Fed chairmanship on Wednesday, it seems the market has already priced in the news.
It's also possible that, although the market views Yellen as dovish, we realize that she's only slightly more dovish than the current chairman. In other words, all in is all in. Given Ben Bernanke's accommodative policies, how much more dovish could a reasonable Fed chair get?
(Read more: Confirmation seen for 'feisty lady' Yellen)
It the U.S. goes into default because Congress fails to raise the debt ceiling, investors won't rush into bonds like they did in 2011, said Matt Tucker, BlackRock's head of iShares fixed-income strategy. Instead, Treasurys could sell off.
Many have compared this situation to the one in 2011, when Standard & Poor's downgraded U.S. debt because of "political brinksmanship." That tanked stocks, which sent people into Treasurys as a safe haven. So, investors paradoxically ended up buying more of the very asset class that S&P had downgraded.
But on Tuesday's "Futures Now," Tucker said that if the government is prevented from paying bills or spending money, the story could be very different.
(Read more: Reluctantly, market faces a real default threat)
"The difference here is that in 2011, we had a lot of concern about what was happening in Washington. This triggered a flight to safety, and Treasurys rallied," Tucker said. But, he added, "if we actually saw a default, whether it was a technical or otherwise default by the Treasury, that could be a very different reaction. You actually could see a more mixed response from Treasurys, even a selloff."
In fact, Tucker is already seeing holders of very short-term Treasurys demanding more yield to compensate them for the risk.
He noted that the Treasury bill maturing Oct. 31 is yielding more than the those maturing in January, which is quite unusual.
"The fact that the October T-bill is trading so high is a reflection of the uncertainty people have about the government making its payments," he said.
Washington's deadlocked negotiations have bled into the Treasury market, as we have been stuck in the same trading range for two weeks now.
Demand for Treasurys increased once the Federal Reserve announced on Sept. 18 that it would maintain its $85 billion worth of asset purchases, rather than begin to taper the pace of that program, as markets expected. Investors used this as a reason to buy Treasurys.
However, as we step into a three-year auction on Tuesday and a 10-year auction on Wednesday, prices have floundered, as investors become wary of the congressional debt ceiling debate. The impasse in Washington is pretty scary, because it could impinge upon the U.S. government's ability to pay its debt in the short term.
(Read more: Prices dip, investors wary before debt showdown)
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