Key Takeaways with Craig
US financial markets continue to weigh corporate earnings, inflation readings, interest rate expectations and the health of the US economy. Today, at least, that all added up to generally higher stock prices and lower yields. Equity price gains were led by the Nasdaq, which in turn, was pushed higher by shares of Tesla stock which were up by nearly 10% after reporting second quarter earnings. Somewhat unsurprisingly, given the stock market rally, implied volatility in the options markets declined, with Nasdaq vol trading at levels we last saw in mid-April.
Treasury yields were lower across the board by between 9 and 16 basis points. The 2-Year yield fell by between 15 basis points while the 10-Year was down by about 12. However, the 2-Year and 10-Year yields were still inverted by just slightly less than 20 basis points, according to CME’s Micro Treasury Yield futures. The July FOMC meeting remains solidly in play, as the market continues to weight the possibility of a 75 versus 100 basis point move. As you can see from the excerpt from CME’s FedWatch tool below, the Fed Funds futures market is currently pricing in approximately a 73% chance of a 75 basis point hike and 27% chance of a 100 basis point hike. As you can see, a week ago, the market was pricing a 45% chance of a 100 basis point move.
Other notable price moves at CME today include:
- Grains futures markets, which were broadly lower
- WTI Crude Oil futures, which were down by about 3.5%
- Most major currencies were higher relative to the US Dollar in CME futures markets, perhaps as a result of lower Treasury yields
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