Market Wrap

6 Jul 2022

The SPX was moving sideways in a choppy trade for most of the day until the index popped higher after the release of the FOMC Minutes and closed 0.5 percent higher.

The minutes did not contain any major surprise, but were viewed as relatively hawkish, as short-term interest rate futures dropped lower in the wake of the release, which is implying a steeper rate hike path (see chart below).

https://bucket.mlcdn.com/a/3517/3517811/images/cf8defdbaa58cf7a7a2bd0258f6302db31c876c2.png

Economic Data US

• Weekly MBA Mortgage Applications Index -5.4% vs 0.7% prior
  
• June IHS Markit Services PMI 52.7 vs 51.6 prior
  
• June ISM Non-Manufacturing Index 55.3% (consensus 54.2%) vs 55.9% prior
  
• May JOLTS 11.25M mln vs 11.68M prior
  

Gamma Discussion

Put option activity was below trend once again, while the SKEW index dipped to the lowest level since April and the VIX declined to 26.7 percent - inline with our fair price estimate.

https://bucket.mlcdn.com/a/3517/3517811/images/cf8defdbaa58cf7a7a2bd0258f6302db31c876c2.png

Since the last OEPX event put open interest does not improve from relatively depressed levels (see chart above), which is suggesting that investors do not feel the need to put more hedges in place.