Market News Watch

Stocks Slump, Dollar Jumps Ahead Of CPI 'Event Risk'

Weakness in stocks today – after an ugly claims print, ECB hawkishness-ish, and anxiety ahead of tomorrow’s ‘event risk maximizing’ CPI print. Nasdaq was down over 2.5% and the S&P close behind, down over 2%. Stocks closed on their lows…

…took the US majors into the red for the week led by the S&P and Nasdaq…

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Does anyone else get the sense that this directional thrust ahead of tomorrow is just setting us up for a huge reversal higher on CPI?

Financials and Tech were the hardest hit today (both down over 2%) but everything was down and only energy stocks are higher on the week…

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Ahead of the CPI print, The S&P broke out (to the downside) of the 4080-4160 range in the S&P having traded sideways since the initial surge off the “Bostic ‘Pause'” short-squeeze…

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Further SpotGamma expects volatility to increase into Tuesday due to the large VIX expiration positions and expiration on Wednesday AM (reminder that the last day that 6/15 VIX index options trade is on Tuesday).

It appears equity risk protection was in demand heading into tomorrow as VIX spiked back above 26…

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Treasuries were mixed today with the short-end notably underperforming (2Y+4bps, 30Y-1bp) but all yields are still higher on the week (and the yield curve flatter)…

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Source: Bloomberg

The dollar rallied up to its highest since May 23rd on the back of EUR weakness…

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Source: Bloomberg

After Lagarde offered up some ‘whatever it takes’ love to the PIIGS – as fragmentation fears rise – the Euro responded by tumbling top its weakest against the dollar since May 22…

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Source: Bloomberg

The ECB’s comments pushed market expectations to 150bps of rate-hikes by year-end (US markets are still pricing in 200bps of rate-hikes from The Fed left this year)…

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Source: Bloomberg

European fragmentation is starting to loom and ‘Italeave’ risk is back being of note (not high just non-negligible)…

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Source: Bloomberg

Crypto was relatively quiet for once (amid the more chaotic moves in stocks) with Bitcoin basically flat on the day, hovering around $30,000…

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Source: Bloomberg

Gold was down very modestly, despite the big jump in the dollar, but held on to the $1850 level…

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Oil was slightly lower on the day but WTI held above $121…

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Nominal gas prices hit $5 for the first time in history today, but we note, inflation-adjusted, we remain below the 2008 peak… for now…

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Source: Bloomberg

US NatGas prices rebounded after last night’s tumble (on the Freeport LNG terminal fire) but remain lower while EU NatGas prices are notably higher…

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Source: Bloomberg

Finally, SpotGamma notes that going into tomorrow’s CPI print, the options market is very balanced. They base this from our Risk Reversal indicator shown below, and the VVIX. This -0.07 reading is telling us that the S&P skew is pretty neutral and we expect a shift in this out of next week.

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So, do you feel lucky punk?

Will CPI come in hotter than expected.. or not?



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