US Equity prices were mixed but little changed today after the stock market initially reacted positively to Federal Reserve Chairman Jerome Powell comments that suggested the Fed would continue an accommodative monetary policy and that the current inflation increases were ‘transitory’. The Dow and the S&P 500 were up slightly while the Nasdaq and Russell 2000 were down a bit while implied volatility fell in the CME Group equity index options markets with most of the earnings season still to come over the next couple of weeks.
US Treasury futures markets continued the back and forth action as prices rose and yields fell at the long end of the curve after the opposite action yesterday. Similarly, the US Dollar fell versus most major currencies after rallying yesterday as it seems that the debate about the transitory (or not) nature of the current inflation signs will continue.
Commodity markets were active at CME Group again as grains futures prices were up by 2.5-3.5%, Gold prices were up by about 1% and WTI Crude Oil futures prices fell by nearly 3.5% after news broke that Saudi Arabia and the UAE had reached and agreement that would likely lead to an OPEC agreement to increase production. This fits nicely into this week’s WTI Crude Oil theme in recognition of the successful launch of the Micro WTI Crude Oil (MCL) futures product. At the time of this writing, on just the third day of trading, over 40,000 MCL contracts had traded on CME Globex. As you can see from the blue line in the upper QuikStrike graph, implied volatility (IV) in the WTI Crude Oil options rose from about 32% to 34.5% today, while the lower graph, which depicts the IV of the 25 Delta Calls minus that of the Puts, shows that the Puts are trading about as high relative to Calls as they have at any time over the past 3 months.