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January 4, 2019

Blockbuster Jobs Report Sends Rates and Stocks Higher

 

Strong Jobs Report Sends Rates Soaring Higher

Treasury yields and swap rates closed 10-15 basis points higher following this morning’s blockbuster non-farm payroll report which showed the U.S. economy added 312K jobs in December--well above consensus estimates of 184K gain. The details of the report were also strong as labor force participation rose and average hourly earnings rose 3.2% y/y--the fastest annual pace since 2009. Fed Chairman Jerome Powell added to the positive momentum, stating in a speech to the American Economic Association that the...

January 3, 2019

Rates Fall Sharply as Concerns About Global Growth Rise

 

Treasury Yield Curve Now Forecasting Fed Policy Mistake in 2019

With a significant kink at the 1 year mark, the US Treasury curve is now pricing in a policy mistake by the Federal Reserve. The market’s expectations for interest rates at the end of 2019 sit nearly 70 basis points below the Fed’s own projections. Federal Funds futures now pricing in a 55% likelihood of a cut in 2019. Investors will be paying close attention to tomorrow’s jobs report- a strong number could mean a sell-off in Treasurys, while a weak number would support the narrative that the...

January 2, 2019

More of the Same to Start 2019

 

Bumpy Session Kicks Off 2019

China’s manufacturing sector contracted for the first time in nearly two years, renewing concerns about a synchronized global economic slowdown that will be top of mind for investors in 2019. China comprises over 15% of the world economy, a slowdown both there and in Europe comes at a time when market confidence is low following a volatile December. US markets started down as much as 1% before rallying, the S&P 500 and Nasdaq Composite ultimately closing up 0.2% and 0.5% respectively.

 

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December 31, 2018

Risk Assets Look to End 2018 on Positive Note

 

US Equities Higher to Close Out a Historically Bad December

US equities are set to close moderately higher as both the S&P 500 (+0.58%) and the Dow Jones Industrial Average (+0.97%) sit in positive territory. Volume was 30-35% lower than normal for both indices as many investors sit on the sidelines ahead of the new year. Regardless of where equities close, December 2018 will go down in history as the worst for stocks since the Great Depression.

 

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December 28, 2018

US Equities Break Losing Streak, But Volatility Remains Elevated

 

Equities End Wild Week Up 3%, Breaking Three Week Losing Streak

Equities ended a wild week with another exciting session, climbing as much as 1.5% in intraday trading before reversing course late in the day to close modestly lower. The Dow Jones Industrial Average closed down 0.3% while the S&P 500 closed down 0.1%. On a positive note, all three US indices ended a three week losing streak by closing up at least 3% on a holiday-shortened week. The VIX or Fear Index remains elevated at 28.68, and the VIX curve (which typically can be used to estimate...

December 26, 2018

Yes, We're Back in Black

 

Is This the End of the Correction?

Today in financial markets we saw a swift reversal of the risk-off trading that dominated sentiment on Christmas Eve (and much of December):

  • Equities: After teetering on the brink of a bear market on Christmas eve, U.S. equity markets roared back today as the DJIA registered its largest one-day point gain ever, surging more than 1080 points or 5%. The S&P 500 and NASDAQ also jumped 5% and 6%, respectively, the biggest one-day gain since March 2009. Consumer shares paced the rally with shares of...

December 24, 2018

Ho-Ho-Horrible Day for Risk Assets

 

Dreaming of a Non-Red Christmas

Those that were expecting a Santa rally following equity markets’ worst week in the past decade were severely disappointed in today’s holiday-shortened trading session. Major indices closed 2.21%-2.91% lower on the day, as the DJIA experienced its worst Christmas Eve in history, down 653 points.  US Treasurys extended their rally, with yields/swap rates declining 3-9 bps across the curve in a bull steepening pattern. The yield on the 10-year note is poised to finish near 2.74%, its lowest since April and 50 bps below the peak...

December 21, 2018

Investor Fear Continues to Drive Market Lower

 

Investor Fear and Volatility Remain High

Much of the same risk-off sentiment that characterized financial markets over the past two weeks was observed during today’s trading session: 

  • The S&P 500’s put-call ratio, a ratio of bearish bets to bullish bests, reached all-time highs at 1.84
  • VIX (commonly referred to as the “Fear Index”) closed at 30, making it only the third time in the past five years the volatility index has breached the 30.0 level
  • US Treasurys rallied, with yields/swap rates declining 1-5bps across the curve...
December 20, 2018

Risk Assets Fall as Geopolitical Tensions, Budget Impasse Add to Concerns

 

US Escalates Tensions with China After Arresting Two Chinese Nationals

The US Justice Department officially brought criminal charges to two Chinese hackers - the latest in a series of hawkish moves by the US administration. The charges come weeks after the U.S. antagonized China by asking Canada to arrest Huawei CFO Meng Wanzhou, and come as the U.S. and China continue to negotiate trade tariffs. The escalation couldn’t have come at a worse time for markets, as most risk assets sit a full 40% below their October highs.
 

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December 19, 2018

Sell Off Continues After Fed Hike

 

Fed Moves Rates Another Quarter Point, But Commentary Unnerves Markets

The Federal Reserve raised rates by 25 basis points to the 2.25-2.50% Fed Funds range, making good on a rate hike that had been anticipated for months.
 
While the 4th rate hike of 2018 was as expected, markets were disappointed to some extent that Fed Chair Jerome Powell’s comments didn’t more fully acknowledge current economic weakness. Rather than capitulate to wide-ranging investor pessimism, Powell noted that the Fed still expects a “robust economic backdrop” in 2019. He...

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