Latest news with #CboeVolatilityIndex
Yahoo
4 hours ago
- Business
- Yahoo
Tariff-Resistant Economy Soothes Traders Ahead of Jobs Day
(Bloomberg) -- Options traders are betting the S&P 500 Index will post its smallest swing in months following Friday's US employment report, highlighting how a spate of better-than-expected data has calmed investor worries over the economic impact of President Donald Trump's tariffs. The Global Struggle to Build Safer Cars At London's New Design Museum, Visitors Get Hands-On Access LA City Council Passes Budget That Trims Police, Fire Spending ICE Moves to DNA-Test Families Targeted for Deportation with New Contract NYC Residents Want Safer Streets, Cheaper Housing, Survey Says The benchmark is projected to move 0.9% in either direction on Friday, according to data compiled by Piper Sandler & Co. That figure, based on the prices of S&P 500 options straddles as of Tuesday's close, is the smallest implied swing ahead of a jobs print since February and below an average realized move of 1.3% over the past year. Concern over the global trade war's impact on US growth flared in early April, after Trump unveiled a list of tariffs aimed at the country's trading partners around the globe. Stocks tumbled, with the S&P 500 falling to the edge of a bear market. But Trump has mitigated or stalled many of those levies in the weeks since, while data on measures such as inflation and job openings suggest the economy is taking the trade chaos in stride. The S&P 500 is just 2.8% off its all-time high reached earlier this year, following a weekslong surge. 'Tariffs initially spooked markets, but stocks have recovered because there aren't meaningful cracks in the economy yet,' said Vishal Vivek, equity trading strategist at Citigroup Inc. 'The risk is if unemployment unexpectedly spikes. Then stocks would need to reprice for slower growth.' Economists polled by Bloomberg expect the US economy to have created roughly 130,000 in May, down from 177,000 a month prior. The jobless rate is expected to hold steady at 4.2%. ADP Research data on Wednesday showed hiring decelerated to the slowest pace in two years last month, raising concern that Friday's non-farm payrolls figures could also show labor conditions weakening. A separate report showed activity at US service providers slipped into contraction territory last month for the first time in nearly a year. The S&P 500 Index traded 0.1% higher at 10:04 a.m. in New York. Sanguine Outlook Trader positioning reflects a sanguine outlook going into the report. After the S&P 500 soared 6.2% last month — its best May since 1990 — hedge funds and other large speculators have turned net short on futures tied to the Cboe Volatility Index for the first time in five weeks, data from the Commodity Futures Trading Commission show. Solid economic numbers helped boost their confidence. The Citigroup US Economic Surprise Index, a rolling measure of whether economic indicators are clocking in above or below expectations, turned positive in late May for the first time since mid-February, when the S&P 500 traded at records. Meanwhile, the Atlanta Fed's GDPNow model sees real gross domestic product growing at a 4.6% annualized rate in the second quarter, up from a contraction of 0.2% in the first three months of the year. Of course, a negative jobs day surprise could sour the mood. JPMorgan Chase & Co.'s trading desk, led by Andrew Tyler, said in a Monday note the S&P 500 may drop as much as 3% if the economy created fewer than 100,000 jobs in May. The chance of such an outcome, however, is only around 5%, according to his estimates. In the most likely scenario, jobs growth last month will come in between 115,000 to 135,000, with the index gaining 0.25% to 1%, Tyler says. The jobs data will also help investors gauge whether the Federal Reserve will keep rates on hold for the foreseeable future, as it attempts to balance trade war uncertainties with threats of slowing growth and accelerating inflation that could result from the tariffs. The central bank enters a blackout period this weekend ahead of its June 18 rate decision. 'Even if jobs growth somewhat slows, traders will give this report a pass because employment data lags,' said Larry Benedict, chief executive of The Opportunistic Trader, a financial market-research firm. 'It will take a few months before the tariff impacts will really begin to appear in those figures.' (Updates with ADP, services data, S&P 500 trading in sixth paragraph.) YouTube Is Swallowing TV Whole, and It's Coming for the Sitcom Millions of Americans Are Obsessed With This Japanese Barbecue Sauce Is Elon Musk's Political Capital Spent? Trump Considers Deporting Migrants to Rwanda After the UK Decides Not To Mark Zuckerberg Loves MAGA Now. Will MAGA Ever Love Him Back? ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
27-05-2025
- Business
- CNBC
A market options hedge as other risks lurking out there despite Tuesday's rally
Bond yields provide critical insights into economic expectations, inflation, and currency valuation. Higher bond yields, especially on government bonds, can signal expectations of stronger economic growth. Lower yields suggest economic slowdown or recession fears, as investors flock to safe assets, driving bond prices up and yields down. Higher economic growth is good, but higher inflation is not, and yields also incorporate inflation forecasts. Higher yields may also indicate rising inflation expectations, as investors demand compensation for eroding purchasing power. In theory, investors can distinguish whether yields are increasing due to better economic expectations or worse inflation expectations by observing the spread between nominal yields and inflation-protected securities (TIPS), which reflects breakeven inflation rates, or at least inflation as measured by CPI-U . Consumers generally favor a stronger currency, which increases their purchasing power of imported goods. Domestic producers and exporters favor a weaker currency, whose goods will be more competitive. Higher domestic yields, all else equal, elevate the local currency's value. 'Carry trade' risk For instance, if U.S. 10-year yields rise relative to German bunds or Japanese bonds, the dollar may strengthen against the euro or yen. Lower yields reduce a currency's appeal, potentially weakening it against other currencies, especially if other central banks offer higher rates. These yield differentials are key drivers in carry trades. A narrowing yield differential between U.S. and foreign bonds often pressures the dollar, and potentially other dollar-denominated risk assets. In early 2024, the spread between Japanese and U.S. Treasury rates began to narrow, falling by ~130 basis points from more than 4% to less than 2.8%. (1 basis point equals 0.01%.) This prompted concerns about substantial deleveraging as investors worried about an unwinding of the yen carry trade. A drop in U.S. rates propelled that swing, but Japanese government bond yields have recently risen sharply. This is problematic because it might pressure the carry trade if Japanese rates rise more quickly than US rates, and the amounts involved are substantial. Japan is even more indebted than the U.S. due to the size of its economy, roughly 250% of Japan's GDP, with total government debt of approximately $8 trillion. If the spread does not compress, then that suggests U.S. Treasury rates would also rise, which could pressure other risk assets. If Japanese rates continue to increase, this presents a global risk. The S & P 500 has clawed back more than 70% of its peak-to-trough losses from the all-time highs in February, and the Cboe Volatility Index (VIX) , although elevated, is well off the April peak. For these reasons, I think re-initiating hedges might be advisable. For example, a June 30th (month-ending) SPDR S & P 500 ETF Trust (SPY) 575/525 put spread ($50 wide) cost ~ $8.90 per contract or just over 1.5% of the current share price of the ETF, and less than 18% of the difference between the strikes, offering a payoff of better than 4.5:1. The trade: Buy SPY June 30 $575 put Sell SPY June 30 $525 put DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
CNBC
27-05-2025
- Business
- CNBC
Don't expect the market to go anywhere this summer, says JPMorgan
Looking for another leg higher in stocks this summer? JPMorgan thinks investors should pump the breaks. Fabio Bassi, the bank's head of cross-asset strategy, warned the S & P 500 could "remain rangebound, with limited short-term upside." He added: "The rally to our bull case scenario of 5,800 for S & P 500 has played out, but from here we expect a consolidation and range-bound dynamic." Indeed, the S & P 500 has surged 20% since hitting an intraday low on April 7, as investor sentiment recovered after the "liberation day" tariff shock that sent global markets tumbling. The benchmark closed Friday's session at 5,802.82 (U.S. markets were closed Monday due to the Memorial Day holiday). .SPX YTD mountain SPX year to date The protectionist U.S. trade stance raised concern of persistent inflation — leading investors to lower their expectations for Federal Reserve interest rate cuts. CME Group's FedWatch tool shows traders see the central bank lowering rates twice in 2025. They expected at least three rate cuts when the year began. "The revival of the 'higher for longer' narrative, coupled with reduced tariff concerns, is likely to constrain the expansion of equity leadership," Bassi wrote. "Investors are expected to continue paying a premium for high-quality growth companies, resulting in an unhealthy concentration within the tech sector and the Mag7." The strategist recommended clients hedge against potential downside by buying call options on the Cboe Volatility Index (VIX) , essentially betting Wall Street's "fear gauge" will rise. But Wall Street is set to begin the shortened trading week on a strong note. S & P 500 futures popped more than 1% after President Donald Trump delayed a 50% levy on European goods until July. However, those gains are likely short lived, if JPMorgan's assessment is correct. Elsewhere Tuesday morning on Wall Street, Barclays became the first shop on Wall Street to downgrade CoreWeave since its IPO. The bank lowered its rating on the stock to neutral from overweight. The stock nevertheless added another 4% in premarket trading. "With its voice-A.I platform, SoundHound is a direct play on the A.I revolution," analyst James Fish wrote.
Yahoo
17-05-2025
- Business
- Yahoo
Why the Stock Market's 'Fear Index' Has Normalized Faster Than Ever Before
Between April 10 and May 12, the Cboe Volatility Index declined from above 40 to below 20 at the fastest rate on record. The Trump Administration's various tariff pauses have given investors confidence that tariffs will ultimately settle well below the rates proposed in early April. Strong first-quarter earnings have also reassured investors concerned that tariffs will drag on been a year of such extremes on Wall Street that even volatility measures have been historically volatile. The Cboe Volatility Index (VIX), otherwise known as 'the fear index,' closed above 40 for the first time since 2020 in early April when President Trump sent the stock market into a tailspin with his 'Liberation Day' tariffs. Then, starting on April 9, when Trump paused most of those tariffs for 90 days, the VIX began a rapid descent. From the close on April 10 to May 12, the VIX slid from 40.72 to less than 20, the level that many consider the delineator between normal and elevated volatility. The 21-day slide was the fastest the VIX has settled back into normal territory in its history going back to 1990, according to a recent analysis from Bespoke Investment Management. Easing trade tensions has been the primary driver of the VIX's decline in recent weeks. U.S. and Chinese officials agreed last weekend to slash their respective tariff rates for 90 days while the two countries discuss a more lasting end to their tit-for-tat trade war. When officials announced the agreement on Monday, the VIX fell below 20 and the S&P 500 erased the last of its 'Liberation Day' losses. The VIX closed Friday at 17.24, down more than 20% from a week earlier. Trump's various tariff pauses 'gave a lot of portfolio managers the confidence that the off ramp was there,' said David Kostin, chief U.S. equities strategist at Goldman Sachs Research. But the "off ramp" hasn't returned tariffs to their former levels; it's put them on a new path entirely. Commerce Secretary Howard Lutnick on Sunday wrote off the possibility of lowering tariffs below 10%. The effective U.S. tariff rate is currently 17.83%, up from 2.42% at the beginning of the year and only slightly below the 22.44% rate set on 'Liberation Day.' A solid first-quarter earnings season has helped to smooth over some lingering concerns about the drag tariffs could have on economic growth. Heading into this week, the S&P 500 was on track to report earnings growth of more than 13%, well above the 7% expected at the end of March. Plenty of uncertainty about the outlook remains. 'Liberation Day' tariffs are set to resume in early July, right around the time companies begin reporting earnings for the quarter in which the bulk of tariffs took effect. That period could see a return to April's volatility if the White House can't reach agreements with the dozens of countries it has threatened with tariffs. Read the original article on Investopedia
CNBC
16-05-2025
- Business
- CNBC
Bulls crushed the volatility and rallied the market back. Carter Worth on what happens next
(Check out Carter's for actionable recommendations and live nightly videos.) The "vol crush" is complete, with the Cboe Volatility Index (VIX) now back down to a level that prevailed just before the stock market's sell-off got underway on February 19 (Tuesday, February 19 th was the day the S & P 500 Index registered its all-time high). A volatility crush is a sudden and sharp decrease in implied volatility – which is the market's expectation of future volatility, leading to a corresponding drop in the prices of options contracts. This typically happens after an event that initially caused a spike in volatility, such as the announcement of prospective aggressive tariffs. As seen in the chart below, the "vol crush" leaves the VIX Index back down "to the penny" to the uptrend line in effect the past 6 months. Our thinking here and now is to anticipate a bounce in the VIX in the day/days ahead — and a corresponding dip in the S & P 500 Index . DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
