| October 12, 2022 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Wall Street's 'fear gauge' is flashing a warning that stocks could be about to fall off a cliff
Joseph Adinolfi - MarketWatch
The CBOE Volatility Index has captured the attention of market analysts this year as a key relationship between Wall Street's "fear gauge" and the S&P 500 index appears to have broken down.
Typically, the VIX, a popular measure of the stock market's expectation of volatility based on S&P 500 index options, and S&P 500 index itself share an inverse correlation. When the S&P 500 falls to new multiyear lows, like it did early this week, the VIX climbs to new highs. However, this relationship has broken down this year. Most recently, the VIX failed to take out its highs from June as the S&P 500 logged its lowest closing low since September 2020 this week.
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Does VIX Volatility Foretell A Stock Market Crash?
William Baldwin - Forbes
The market seems to be getting freaky. The S&P 500 was up 3.1% on October 4, off 2.8% on October 7. If the market behaved normally, moves like this should be rare, occurring, respectively, once in three years and once a year.
Two big moves in one week. They have the feel of the foreshocks before an earthquake. Do these rumblings suggest that stocks are in for a catastrophic, recession-fed collapse over the next year?
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US Economy Is 'Doing Very Well' and There Aren't Signs of Instability: Yellen
Jennifer Sor - Markets Insider
Despite the volatility rocking stocks and bonds, the US economy is still "doing very well" and financial markets aren't showing signs of instability, according to Treasury Secretary Janet Yellen.
"From the perspective of the United States, I think the United States is doing very well," Yellen said in an interview with CNBC on Wednesday, pointing to strength in the labor market. The US added 263,000 new jobs in September - above estimates of 250,000.
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The Fed is draining the stock market and even the 'healthy fish' will die, billionaire investor Barry Sternlicht says
Jennifer Sor - Business Insider
In an interview with Bloomberg, the chairman and CEO of Starwood Capital criticized the Fed for its delayed response to tackling inflation and over-liquid market conditions. Soaring prices have finally prompted the central bank to issue aggressive rate hikes and begin shrinking its balance sheet this year but the rapid pace of tightening could easily send the economy into a recession, economists have warned.
"Powell is unbelievably late doing this. He sat still while the meme stock craze was going," Sternlicht said, adding that the belated reaction could kill off investors' gains across the entire market.
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Stock market inflows hit near-records last week suggesting that investors think the bottom is in, Bank of America says
Matthew Fox - Business Insider
That's according to a Tuesday note from Bank of America, which observed that clients of the bank poured $6.1 billion into US stocks during last week's choppy trading. The Samp;P 500 rallied 5% between Monday and Tuesday of last week, but gave back most of those gains during the rest of the week.
Last week's buying spree in US stocks was the third largest inflow seen since the bank began tracking the data in 2008. It also represented the fifth consecutive week of inflows. The bank tracks the trading activity of its clients, which include hedge funds, institutional, and private investors.
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The market is flashing signs that a new bottom is forming and stocks could be poised for a fresh rally, Oppenheimer head technical analyst says
Jennifer Sor - Business Insider
His comments come amid a volatile month for US stocks after the Federal Reserve issued another 75-point rate hike in September, sticking to its pledge to bring inflation back to target levels. The Fed's hawkishness has sent stocks spiraling, with the S&P 500 notching a new closing low at the end of last month.
But that fallout hasn't been seen in small cap stocks, Wald said in an interview with CNBC on Tuesday which could be a signal that a new rally is in the cards.
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Vanguard to close a US ETF for the first time
Jackie Noblett - Financial Times
Vanguard has announced it intends to close a US exchange traded fund, marking a first for the asset manager despite its 20 years in the market.
The firm intends to liquidate the $44mn Vanguard US Liquidity Factor ETF in November, the firm announced.
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Fed Minutes Show Concerns of More Persistent High Inflation
Nick Timiraos - WSJ
Federal Reserve officials expressed concern at their meeting last month over the persistence of high inflation and expected that bringing prices and wages down would likely require the labor market to weaken.
Many officials revised higher their expectations for anticipated rate rises, though some signaled greater caution about overdoing increases due to elevated risks of economic and financial volatility, according to minutes of the Sept. 20-21 gathering released Wednesday.
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Inverse Cramer ETF is coming to the real world
Tony Dong - Nasdaq
Previously in May, I wrote about what a hypothetical "Inverse Jim Cramer" ETF would look like. It's worth noting that the concept of "inversing Cramer" was highly popular on social media like r/WallStreetBets given his spotty track record.
At the time, I figured inverse Cramer would remain a meme. Well, I was proven wrong. An enterprising and clearly meme-savvy fund manager out there, Tuttle Capital Management has actually filed prospectuses for two Cramer-tracking funds:
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| | | | | | Exchanges | | | CME Group volumes jump as derivatives maintain momentum; The group has seen ADV rise by 21% year on year as investors pile into derivatives in an attempt to navigate the current climate of volatility.
Laurie McAughtry - The Trade
CME Group has seen its quarterly international average daily volume (ADV) jump to 6.1 million contracts in Q3 2022, up 21% year on year. "Market conditions in the third quarter of the year continued to create a heightened need for risk management globally as clients worked to navigate volatility caused by ongoing geopolitical tensions and economic uncertainty," said Derek Sammann, senior managing director and global head of commodities, options and international markets at CME Group.
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MIAX Options Exchange - Experienced an MEI Connectivity Issue - All Systems Operating Normally
MIAX
Please be advised that the MIAX Options Exchange experienced an MIAX Express Interface (MEI) connectivity issue at approximately 09:50:40 through 09:51:18. We are investigating the root cause.
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| | | | | | Regulation & Enforcement | | | Ex-HSBC Trader Claims Bank Has 'Epic' Front-Running Problem
Bob Van Voris - Bloomberg
A former HSBC Holdings Plc trader sued the bank, claiming he was fired for warning management about its "epic" front-running problem and confronting a colleague about trading ahead of an order for Steve Cohen's Point72 Asset Management.
Stephen Callahan, who said he joined HSBC's US rates trading desk as a director in 2021, claimed in a suit filed Tuesday in Manhattan federal court that he witnessed "rampant front-running, including directives to junior traders to 'always' prioritize the bank's proprietary account."
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FIA offers comments on DCO governance requirements
FIA
FIA has filed comments with the US Commodity Future Trading Commission on a proposed rulemaking regarding governance requirements for Derivatives Clearing Organizations (DCOs).
The proposal is a welcome development to ensure an appropriate level of engagement with DCO's stakeholders and provides several governance fora to consult and consider DCO's stakeholders' views and inputs on matters that could materially affect the risk profile of the DCO. FIA supports development of robust and transparent governance arrangements which promote DCOs' engagement with their members and customers.
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| | | | | | Strategy | | | As Markets Go 'Crazy,' Ariel Investments Touts Old-School Value Strategy
Vildana Hajric - Bloomberg
Markets are going "crazy" right now amid historic volatility, and this can turn out to be an opportunity to scoop up beaten-down value stocks, according to John Rogers at Ariel Investments.
"I'm trying to find stocks that are selling at low multiples, that are selling at significant discounts to private-market value, companies that have strong balance sheets and strong moat around them," the firm's chairman said on Wednesday at the Bloomberg Invest conference. "We really are sticking to our tried-and-true principles, and that value really hasn't changed."
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| | | | | | Miscellaneous | | | Great Resignation? Statistics Show US Workers Are Staying Put
Justin Fox - Bloomberg
The past couple of years have been a famously tumultuous time for the US labor market â with the steepest employment losses ever early in the pandemic, a rapid recovery and then a so-called Great Resignation that was more about switching jobs than resigning.
Through all of that, the median number of years that American wage and salary workers have been with the same employer didn't budge. It was 4.1 years in January 2020, and according to job-tenure data released by the US Bureau of Labor Statistics to little fanfare last month, it was 4.1 years in January 2022.
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