Stocks Slump, Dollar Jumps Ahead Of CPI ‘Event Risk’

Weakness in stocks today – after an ugly claims print, ECB hawkishness-ish, and anxiety ahead of tomorrow’s ‘event risk maximizing’ CPI print. Nasdaq was down over 2.5% and the S&P close behind, down over 2%. Stocks closed on their lows…

…took the US majors into the red for the week led by the S&P and Nasdaq…

Does anyone else get the sense that this directional thrust ahead of tomorrow is just setting us up for a huge reversal higher on CPI?

Financials and Tech were the hardest hit today (both down over 2%) but everything was down and only energy stocks are higher on the week…

Ahead of the CPI print, The S&P broke out (to the downside) of the 4080-4160 range in the S&P having traded sideways since the initial surge off the “Bostic ‘Pause'” short-squeeze…

Further SpotGamma expects volatility to increase into Tuesday due to the large VIX expiration positions and expiration on Wednesday AM (reminder that the last day that 6/15 VIX index options trade is on Tuesday).

It appears equity risk protection was in demand heading into tomorrow as VIX spiked back above 26…

Treasuries were mixed today with the short-end notably underperforming (2Y+4bps, 30Y-1bp) but all yields are still higher on the week (and the yield curve flatter)…

Source: Bloomberg

The dollar rallied up to its highest since May 23rd on the back of EUR weakness…

Source: Bloomberg

After Lagarde offered up some ‘whatever it takes’ love to the PIIGS – as fragmentation fears rise – the Euro responded by tumbling top its weakest against the dollar since May 22…

Source: Bloomberg

The ECB’s comments pushed market expectations to 150bps of rate-hikes by year-end (US markets are still pricing in 200bps of rate-hikes from The Fed left this year)…

Source: Bloomberg

European fragmentation is starting to loom and ‘Italeave’ risk is back being of note (not high just non-negligible)…

Source: Bloomberg

Crypto was relatively quiet for once (amid the more chaotic moves in stocks) with Bitcoin basically flat on the day, hovering around $30,000…

Source: Bloomberg

Gold was down very modestly, despite the big jump in the dollar, but held on to the $1850 level…

Oil was slightly lower on the day but WTI held above $121…

Nominal gas prices hit $5 for the first time in history today, but we note, inflation-adjusted, we remain below the 2008 peak… for now…

Source: Bloomberg

US NatGas prices rebounded after last night’s tumble (on the Freeport LNG terminal fire) but remain lower while EU NatGas prices are notably higher…

Source: Bloomberg

Finally, SpotGamma notes that going into tomorrow’s CPI print, the options market is very balanced. They base this from our Risk Reversal indicator shown below, and the VVIX. This -0.07 reading is telling us that the S&P skew is pretty neutral and we expect a shift in this out of next week.

So, do you feel lucky punk?

Will CPI come in hotter than expected.. or not?