Market Wrap
The SPX opened lower on the heels of the hotter-than-expected June jobs and closed 0.1% lower after a choppy trade.
The employment situation report for June was a blow to the hope of a more dovish Fed and send rate hike expectations soaring, even though the details were less positive:
June marked the third month with downward revisions and the household survey (-315K) was in stark contrast to the headline number (+372K). The unemployment rate stayed flat at 3.6%, as the decline in employment was offset by a decline in the participation rate.
According to Goldman the report indicates a still overheated labor market that is only beginning to slow. The bank continues to expect a 75 bps hike in July, followed by 50 bps in September and 25 bps each in November and December.
Gamma Discussion
Put volume in the SPX complex normalized today after several days of relative underperformance (chart not included), while the Put/Call ratio printed below trend at 1.3 points.
The VIX closed 1.4 points down at 24.7%, below a crucial trendline, and according to our model about 1.5 points too "cheap" relative to its historical correlation with the SPX.
Also rather oddly performing was the VVIX, which closed at the lowest level since October 2019.
Overall dealer gamma now amounts to -297M and the "gamma flip" level at 4000 is now clearly in play.
Looking Ahead
Next week investors will receive the German ZEW Sentiment on Tuesday and the UK's GDP print on Wednesday. According to analysts the UK is essentially already in a recession, and this data point could confirm that view.
Also on Wednesday fresh CPI data gets released in the US, followed by the Beige Book in the afternoon.
On Thursday in the US we have more inflation data with the PPI release and later at night chinese GDP/Output numbers.
Friday will bring US Retail Sales, Industrial Production, the NY EMpire State Index and the Michigan Consumer Sentiment.
Also, earnings season is about to kick into (low) gears next week. As the narrative shifts from rates to earnings we will extensively cover the overall developments in that arena as well and we will offer more data to pro subscribers.
The employment situation report for June was a blow to the hope of a more dovish Fed and send rate hike expectations soaring, even though the details were less positive:
June marked the third month with downward revisions and the household survey (-315K) was in stark contrast to the headline number (+372K). The unemployment rate stayed flat at 3.6%, as the decline in employment was offset by a decline in the participation rate.
According to Goldman the report indicates a still overheated labor market that is only beginning to slow. The bank continues to expect a 75 bps hike in July, followed by 50 bps in September and 25 bps each in November and December.
Gamma Discussion
Put volume in the SPX complex normalized today after several days of relative underperformance (chart not included), while the Put/Call ratio printed below trend at 1.3 points.
The VIX closed 1.4 points down at 24.7%, below a crucial trendline, and according to our model about 1.5 points too "cheap" relative to its historical correlation with the SPX.
Also rather oddly performing was the VVIX, which closed at the lowest level since October 2019.
Overall dealer gamma now amounts to -297M and the "gamma flip" level at 4000 is now clearly in play.
Looking Ahead
Next week investors will receive the German ZEW Sentiment on Tuesday and the UK's GDP print on Wednesday. According to analysts the UK is essentially already in a recession, and this data point could confirm that view.
Also on Wednesday fresh CPI data gets released in the US, followed by the Beige Book in the afternoon.
On Thursday in the US we have more inflation data with the PPI release and later at night chinese GDP/Output numbers.
Friday will bring US Retail Sales, Industrial Production, the NY EMpire State Index and the Michigan Consumer Sentiment.
Also, earnings season is about to kick into (low) gears next week. As the narrative shifts from rates to earnings we will extensively cover the overall developments in that arena as well and we will offer more data to pro subscribers.
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