| October 14, 2022 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | |
| | | | | | Lead Stories | | | Massive turnaround for stocks puts traders on alert for more volatility
Lewis Krauskopf and Megan Davies - Reuters
An eye-popping turnaround in stocks may be less bullish than hoped for, with traders saying short-term hedging activity buoyed equities while leaving the market's grim fundamentals unchanged.
Data showing consumer prices rose more than expected in September initially sent the S&P 500 tumbling to its lowest point since November 2020 on Thursday, only for the index to mount a furious rally towards midday. In total, the index swung 5.4 percentage points on the day to close up 2.6%.
/jlne.ws/3yJ45zX
Violent S&P 500 (SPX) Reversal Hammers Traders Positioned for Slump
Elena Popina - Bloomberg
The stock market's shocking reversals Thursday after a hotter-than-expected inflation report caught many on Wall Street by surprise. Just ask IUR Capital's Gareth Ryan.
Futures contracts on the S&P 500 and Nasdaq 100 indexes plunged after the consumer price index rose more than anticipated in September. Ryan, a managing director at the London-based investment advisory firm, was watching the profit-and-loss statements for some of his clients who were short the futures going into the CPI report. It looked like a winning bet -- and it was, until the markets started moving against them.
/jlne.ws/3rTszme
A Lesson In Volatility
JJ Kinahan - Forbes
I've written multiple times that when market volatility as measured by VIX gets to these levels, markets can move around a lot. If you didn't believe it before this week, you probably do now. VIX has been forecasting daily expected moves of 2% and Thursday was a textbook case. After the S&P 500 fell as low as 3491 on the back of a stronger than expected CPI number, the index then turned and traded as high as 3685, before closing just below 3670. And that, my friends, is volatility at its finest.
/jlne.ws/3yJGvTz
Bank of America Strategists See More Pain Before Stock Markets Hit Bottom
Farah Elbahrawy - Bloomberg
Stock markets and the US economy will have to experience more pain before the Federal Reserve pivots away from its aggressive policy tightening, according to Bank of America Corp. strategists.
Thursday's rally in US stocks after a hot inflation print resembled a "bear hug" amid oversold conditions, high cash levels and the lack of a credit event, strategists led by Michael Harnett wrote in a note. US equities are higher again Friday as the S&P 500 Index opened up 0.7%, putting it on pace for a weekly gain of 1.5%.
/jlne.ws/3euZ8Um
Fed's Next Crisis Is Brewing in US Treasuries
Robert Burgess - Bloomberg
Markets have been whipsawed in recent weeks, first by talk that a cooling labor market would allow the Federal Reserve to "pivot" away from its aggressive interest-rate hiking campaign, and then by comments from central bankers that any such move would be premature â as Thursday's hot consumer price index report proved. Perhaps there's a solution that would allow the Fed to continue to battle inflation while also addressing what is rapidly becoming a potential crisis in the world's most important market â US Treasuries.
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Global markets like 'whack-a-mole', volatility, liquidity are issues - bank execs
Reuters
Trying to navigate through global market stresses is like "whack-a-mole," Citigroup Inc (C.N) CEO Jane Fraser said on Friday, as she added the bank is constantly stress testing scenarios.
Wall Street banking executives said they were keeping a close watch on markets, after the volatility in the U.K., with liquidity a particular focus.
/jlne.ws/3TjeWsJ
A Major US Recession Is Avoidable, US Commerce Secretary Says
Jennifer Sor - Markets Insider
A major US recession at this point is still avoidable, and this is not a "gloom and doom scenario," according to Commerce Secretary Gina Raimondo.
She acknowledged that the economies of China, the European Union and the UK are slowing while the Federal Reserve is tightening monetary.
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'Soft landing' unlikely as Fed tried to get grip on inflation: Robert Rubin
William Watts - MarketWatch
The Federal Reserve is finally on the right path when it comes to fighting inflation, but it's likely to result in a painful economic contraction, former Treasury Secretary Robert Rubin said on Thursday.
"I think most likely we will not have a soft landing, I agree with the chairman of the Fed on that," Rubin said at an event in New York marking MarketWatch's 25th anniversary.
/jlne.ws/3g8FZbt
Why CPI data is such a big stock-market mover this year
Isabel Wang - MarketWatch
Another consumer-price index, another big market move.
U.S. stocks mounted a remarkable turnaround on Thursday with the Dow Jones Industrial Average surging nearly 1,500 points from peak to trough, after a sharp selloff early in session sparked by hotter-than-expected U.S. inflation data.
/jlne.ws/3S3IKbl
Policymakers urged to 'stay the course' on inflation
Darren Dodd - Financial Times
Fresh data from the world's two biggest economies have followed a series of warnings from policymakers gathered in Washington this week about the urgency of defeating the surge in inflation.
China today said its consumer price index edged up to 2.8 per cent in September, as easing commodity costs helped balance soaring increases in food, largely due to a jump in pork prices. Although slightly less than forecast, it was still the highest rate since April 2020 and up from August's 2.5 per cent.
/jlne.ws/3Cwzg2x
Up to 15 years of gains wiped from some gilt ETFs
Steve Johnson - Financial Times
Investors have seen up to 15 years' worth of gains wiped out in some exchange traded funds amid the chaos enveloping the UK gilt market.
iShares' GBP1.1bn Core UK Gilts Ucits ETF (IGLT) is now trading at levels last seen in 2007, having fallen 33 per cent since late last year.
/jlne.ws/3rTY2ET
Volume of options traded on the S&P 500 hits a record high; Indications of a market bottom?
Dino Kurbegovic - Finbold
As traders shook off another bad inflation reading on October 13, the markets staged a solid comeback after the trading day started poorly for all major stock indexes. Dow Jones, S&P 500, and Nasdaq all finished the day in green, up 2.83%, 2.60%, and 2.23%, respectively.
The reversal in the S&P 500 seen yesterday marked the fifth-largest intraday reversal from a low into a green day and the fourth-largest reversal for the Nasdaq.
/jlne.ws/3T1HmHx
| | | | | | Exchanges | | | Vibrant and Growing: Oberon Knapp on OCC's securities lending strategy and the incorporation of new technologies
OCC
OCC is incorporating new technologies as part of our development efforts to re-architect and modernize our core systems. Read about the latest plans for our stock loan programs and our broader transformation in an interview with Oberon Knapp, Executive Director of Participant Solutions and stock loan program leader, for the Securities Finance Times RMA Daily magazine.
/jlne.ws/3RfcRNu
Cboe Focuses on Execution
Terry Flanagan - MarketsMedia
After making nine acquisitions in the past two years, Cboe Global Markets may be a bit less aggressive on the M&A trail, CEO Ed Tilly indicated.
"Rest isn't the right word, but we're focused on executing" on promises made to clients, investors and employees, Tilly said Thursday morning at the Security Traders Association Market Structure Conference in Washington, D.C.
/jlne.ws/3CzsvwP
| | | | | | Regulation & Enforcement | | | Ex-Deutsche Bank Star Salesman Tied To $400 Million FX Dispute; Cimolai said to have bought $400 million of FX derivatives; Some derivatives turned sour after euro dropped against dollar
Donal Griffin, Luca Casiraghi, Giulia Morpurgo, and Steven Arons - Bloomberg
NatWest Group Plc, Deutsche Bank AG, Morgan Stanley and JB Drax Honore are among the financial institutions that helped sell currency derivatives to Cimolai SpA, the Italian building firm now struggling with losses on some of the products, according to people familiar with the matter. The quartet are part of the group of more than a dozen firms that arranged the sale of about $400 million of derivatives to Cimolai, some of which have soured as a result of the euro's plunge against the dollar, the people said, asking not to be identified discussing a private matter.
/jlne.ws/3yGhA3a
| | | | | | Strategy | | | Huge VIX 1x2 Trade
Cboe
Dan Deming @djd551 discusses $VIX, $SPX, #Volatility, #Futures, #Backwardation, #OptionsTrading, and #CallSpread.
/jlne.ws/3EQT8Qq
US Year-Ahead Inflation Views Rise for First Time Since March
Molly Smith - Bloomberg
US year-ahead inflation expectations rose in early October for the first time in seven months and the long-term outlook also crept up, a potentially worrisome development for the Federal Reserve as it tries to keep views anchored.
Consumers expect prices will climb 5.1% over the next year, up from 4.7% in September, according to a survey from the University of Michigan. They see costs rising at an annual rate of 2.9% over the next five to 10 years, a pickup from 2.7%, data Friday showed.
/jlne.ws/3Vn4YrD
2022 Volatility Index strongly correlates to 2008
Dino Kurbegovic - Finbold
The Chicago Board Options Exchange (CBOE) volatility index (VIX) has often been the focus of discussions during troubling market times as it is often called Wall Street's "fear gauge", which is often closely correlated to the S&P 500 index.
When the S&P 500 touches new lows, the VIX often climbs to new highs, and market participants following technical signals often look to VIX to determine where the markets could be heading.
/jlne.ws/3rYilB6
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