A quiet day with no notable macro was just what the doctor ordered ahead of tomorrow’s CPI-inspired likely chaos.
However, no progress at all on the debt ceiling debacle, the growing risk of civil war in nuclear-armed Pakistan, Italy pulling out of China’s BRI, no signals at all that the US banking crisis is over in any way, and hawkish comments from Fed’s Williams:
“What we’re signaling is we’re going to make sure that we achieve our goals and going to assess what’s happening in the economy and make the decision based on that data,” he said. “And if additional policy firming is appropriate, then we’ll do that.”
“I do not see in my baseline forecast any reason to cut interest rates this year,” he said, adding that the economy began the year on a solid footing and he saw two-sided risks to the outlook. “In my forecast we need to keep restrictive stance of policy in place for quite some time.”
Debt Ceiling anxiety remains extreme to say the least with the T-Bill curve insanely kinked… 5/23 3.97 to 6/6 5.34!!
The Dow managed to ramp up to gains on the day (helped by BA) but faded in the last few minutes. The S&P and the Nasdaq ended worst with most of the majors at their lows of the day…
Regional banks ended lower (rejecting an odd buying panic that hit around 1330ET)…
PACW had another chaotic squeezy day…
Shorts were squeezed once again after an ugly open…
Source: Bloomberg
0-DTE traders dragged 1-Day VIX up in line with VIX as they anticipate tomorrow’s CPI…
Source: Bloomberg
Notably, 0-DTE traders dumped calls aggressively into tomorrow’s CPI…
Despite a very strong 3Y auction, yields ended higher on the day – though the belly outperformed (2Y +2.5bps, 5Y unch, 30Y +2.5bps)…
Source: Bloomberg
The 2Y Yield pushed back above 4.00%…
Source: Bloomberg
The dollar extended yesterday afternoon’s rally, back up to one-week highs (resistance)…
Source: Bloomberg
Bitcoin was flat, hovering around $27500, as Ordinals volume surged…
Source: Bloomberg
WTI spiked (around the time of headline about refilling SPR – nothing new), extending gains to two-week-highs (after some weakness intraday)…
Gold also extended its rebound from $2000 (spot)
Finally, bear in mind that the market is pricing in notably less volatility tomorrow (across CPI) than it has for last few months…
As SpotGamma notes, NDX straddle was pricing a ~1.1% move – quite a decline from the +2%’s of the last 6 months.
And after that, vol is expected to drop even more after that…
Source: Bloomberg
… as the stock market remains fearless into the X-Date.
Tyler Durden
Tue, 05/09/2023 – 16:00
