Market Recap: Volatility and Imbalance
Yesterday’s market showcased a bit of volatility, which kept investors on their toes. The day started with mostly sideways trading until around 2 PM when a significant downdraft occurred. However, this downward trend was quickly reversed by a notable buy imbalance towards the end of the trading session. According to Financial Juice, there was a $2.3 billion buy imbalance in the final minutes, which helped lift stocks at the close.
The standout event of the day was the VIX 1-day index, which saw a remarkable increase from a low of 11 to 15.70, marking a 42% surge. This suggests that today, we can anticipate about a 1% movement in the S&P 500. Typically, after the release of the jobs report, volatility on the VIX tends to decrease, leading to a drop in the S&P 500.
Following this volatility reset, we expect regular trading to resume. The VIX 1-day index is likely to open significantly lower today, possibly resulting in an initial knee-jerk reaction higher, irrespective of the job report outcome.
FX Market’s Reaction and Rate Market Trends
- The FX and rates markets are expected to provide a clearer view of the overall market response compared to the equity market.
- There has been some flattening observed in the minus spread, which is a crucial trend to monitor for potential implications post-report.
- The USD looks to be in a bull flag pattern since mid-December and is currently at the lower end of the range, indicating a potential shift based on the job report outcome.
Anticipated Job Report Figures
- Estimates suggest a projection of 170,000 new jobs, a decline from the previous month’s 256,000.
- The unemployment rate is anticipated to remain unchanged, while average hourly earnings are forecasted to maintain a month-over-month percentage and decrease year-over-year.
Economic Indicators and Reports
- The NFIB jobs report indicated a rise in actual compensation changes, showcasing potential wage trends.
- Anecdotal evidence from S&P Global’s PMI report points towards stronger job creation despite a slowdown in output growth.
Insights and Market Observations
- TradingView now includes BTIC Total Return Index futures, providing valuable data for investors.
- Equity financing costs have remained low since the December Fed meeting, indicating a significant decline.
- The New York Fed Primary Dealer Report highlighted a drop in overnight repo activity for equities, aligning with the current trend of subdued leverage demand.
Key Takeaways and Analysis
The information provided in this market recap offers valuable insights into current market trends and potential future outcomes based on economic indicators and reports. Understanding the impact of the job report figures, rate market trends, and FX market reactions can help investors make informed decisions regarding their portfolios.
By monitoring key indicators such as the VIX, USD, and job creation figures, investors can position themselves strategically to navigate market fluctuations and capitalize on emerging opportunities. Additionally, keeping track of reports from reputable sources like S&P Global and NFIB can provide valuable context for interpreting market movements.
Overall, staying informed and proactive in response to market developments is essential for maximizing investment returns and mitigating risks in an ever-changing financial landscape. By incorporating these insights into their investment strategies, investors can better position themselves for success in the dynamic world of finance.