Market Wrap
Recap: The SPX closed 0.1 percent higher, supported by value stocks (+0.6%), while the mega cap growth complex was a headwind (MGK -0.6%).
After the close Walmart cut its EPS guidance and now sees EPS declining by 8-9% YoY in the second quarter and by 11-13% for FY23 (prior guidance -1% YoY).
Market participants had no interest to take on more risk ahead of a data heavy week that will bring the FOMC Statement on Wednesday, the advanced GDP reading on Thursday and the preliminary University of Michigan sentiment as well as the personal income and spending report on Friday, which will include PCE data.
Earnings galore: About 175 S&P 500 companies, which make up nearly 50% of the index’s market cap, are set to report earnings this week.
According to Morgan Stanley revision breadth has dropped sharply over the past month for nearly every sector, ranging from -45% to -28% (chart not included).
The biggest declines were booked so far by Transportation (-45.1%), Materials (-36.4%), Insurance (-27.5%), Consumer Durables (-27.5%) and Semis (-26.5%). Some bright spots were HOusehold & Personal Products (+9.1%), Media & Entertainment (+6.9%) and Healthcare Equipment & Services (+3.7%).
Gamma/VVIX situation: Dealer gamma declined by 65M to -171M, as the market was not able to push above the big gamma cluster spanning from 4000 to 4025 points.
Interestingly the VVIX closed at its lowest level since October 2019, suggesting that VIX options are not pricing in much variance, which will only force more vol control funds into the market.
According to Deutsche Bank the vol control complex has meaningfully raised its equity allocations in the last one month from 37% to 50% as realized as well as implied vol has declined (chart not included).
Despite the weak macro environment, there is a not so remote possibility that the market could squeeze higher once the FOMC meeting is out of the way, when more systematic funds get forced back into the market in a self reflexive spiral.
The following anecdotal observation is highlighting the “dilemma”:
Goldman Sachs prime book was net bought for the 1st time in 4 weeks, though flows were definitively risk-off with short covers (largest since December 2019) outpacing long sales 2.3 to 1.
Macro Products (Index and ETF combined) were net bought led by short covers, while single stocks weren’t sold for a 3rd straight week driven by long sales, according to Goldman.
After the close Walmart cut its EPS guidance and now sees EPS declining by 8-9% YoY in the second quarter and by 11-13% for FY23 (prior guidance -1% YoY).
Market participants had no interest to take on more risk ahead of a data heavy week that will bring the FOMC Statement on Wednesday, the advanced GDP reading on Thursday and the preliminary University of Michigan sentiment as well as the personal income and spending report on Friday, which will include PCE data.
Earnings galore: About 175 S&P 500 companies, which make up nearly 50% of the index’s market cap, are set to report earnings this week.
According to Morgan Stanley revision breadth has dropped sharply over the past month for nearly every sector, ranging from -45% to -28% (chart not included).
The biggest declines were booked so far by Transportation (-45.1%), Materials (-36.4%), Insurance (-27.5%), Consumer Durables (-27.5%) and Semis (-26.5%). Some bright spots were HOusehold & Personal Products (+9.1%), Media & Entertainment (+6.9%) and Healthcare Equipment & Services (+3.7%).
Gamma/VVIX situation: Dealer gamma declined by 65M to -171M, as the market was not able to push above the big gamma cluster spanning from 4000 to 4025 points.
Interestingly the VVIX closed at its lowest level since October 2019, suggesting that VIX options are not pricing in much variance, which will only force more vol control funds into the market.
According to Deutsche Bank the vol control complex has meaningfully raised its equity allocations in the last one month from 37% to 50% as realized as well as implied vol has declined (chart not included).
Despite the weak macro environment, there is a not so remote possibility that the market could squeeze higher once the FOMC meeting is out of the way, when more systematic funds get forced back into the market in a self reflexive spiral.
The following anecdotal observation is highlighting the “dilemma”:
Goldman Sachs prime book was net bought for the 1st time in 4 weeks, though flows were definitively risk-off with short covers (largest since December 2019) outpacing long sales 2.3 to 1.
Macro Products (Index and ETF combined) were net bought led by short covers, while single stocks weren’t sold for a 3rd straight week driven by long sales, according to Goldman.
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