Nasdaq 100 Dips on Hotter than Expected U.S. Inflation Reading
Nasdaq 100 Dips on Hotter than Expected U.S. Inflation Reading
Also 30-year T-bond, gold, crude oil and euro futures
- Nasdaq 100 E-mini futures (/NQ): 0.00%
- 30-year T-bond futures (/ZB): -0.31%
- Gold futures (/GC): +0.30%
- Crude oil futures (/CL): +2.37%
- Euro futures (/6E): -0.19%
Disappointment is theme of the day in financial markets in the wake of the December U.S. inflation report. Both the headline and core readings were warmer than anticipated. The consumer price index increased by 0.3% month over month and 3.4% year over year on the headline, and 0.3% month over month and 3.9% year over year on the core. Observers had expected 0.2% month over month and 3.2% year over year for the headline and 0.3% month over month and 3.8% year over year on the core.
Sparked by a slight deterioration in Federal Reserve rate cut odds, stock futures traded lower as bond yields jumped higher. Rates markets are discounting a 65% chance of a 25 basis-point (bps) rate cut in March (down from 68% yesterday). Precious metals reversed lower on the data release, while the U.S. dollar rebounded to return to unchanged on the week.
Symbol: Equities | Daily Change |
/ESH4 | -0.09% |
/NQH4 | 0.00% |
/RTYH4 | -0.55% |
/YMH4 | -0.09% |
All four U.S. stock indexes were trading unchanged or lower in the futures market at the time this was written. The weak link in the chain this week, the Russell 2000 (/RTYH4), was the clear laggard on approach to the cash open in New York. Technical setups in the S&P 500 (/ESH4) and Nasdaq 100 (/NQH4) remain bullish, however.
Strategy: (49DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 16400 p Short 16500 p Short 17300 c Long 17400 c | 33% | +1215 | -785 |
Long Strangle | Long 16400 p Long 17400 c | 42% | x | -7450 |
Short Put Vertical | Long 16400 p Short 16500 p | 70% | +515 | -1485 |
Symbol: Bonds | Daily Change |
/ZTH4 | -0.01% |
/ZFH4 | -0.04% |
/ZNH4 | -0.07% |
/ZBH4 | -0.31% |
/UBH4 | -0.53% |
Bonds were dropped lower across the curve today as yields rose in response to the disappointing December U.S. inflation report. The 2s10s spread narrowed to -31-bps after the data from -33-bps at the close yesterday. The long-end of the curve (30s (/ZBH4) and ultras (/UBH4)) are the most active contracts on the session. A 30-year bond auction today will provide another jolt to markets.
Strategy (43DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 119 p Short 120 p Short 124 c Long 125 c | 36% | +609.38 | -390.63 |
Long Strangle | Long 119 p Long 125 c | 39% | x | -1843.75 |
Short Put Vertical | Long 119 p Short 120 p | 68% | +328.13 | -671.88 |
Symbol: Metals | Daily Change |
/GCG4 | +0.30% |
/SIH4 | +0.06% |
/HGH4 | +0.37% |
Gold (/GCH4) and silver prices (/SIH4) are fading from their early gains after the inflation report, double tapped by a rise in both U.S. Treasury yields and the U.S. dollar. But the metals are proving resilient, staying in the green thus far today. Volatility in precious metals isn’t necessarily high, but it’s not decidedly low either; both /GCH4 and /SIH4 after IV Ranks north of 20.
Strategy (46DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor Iron Condor | Long 2020 p Short 2025 p Short 2075 c Long 2080 c | 25% | +360 | -140 |
Long StrangleLong Strangle | Long 2020 p Long 2080 c | 44% | x | -3940 |
Short Put VerticalShort Put Vertical | Long 2020 p Short 2025 p | 68% | +190 | -310 |
Symbol: Energy | Daily Change |
/CLG4 | +2.37% |
/HOG4 | +2.91% |
/NGG4 | -1.25% |
/RBG4 | +2.65% |
Crude oil prices (/CLG4) rose about 2% this morning after a vessel carrying Iraqi oil was boarded by Iranian forces in the Gulf of Oman. According to Bloomberg, the tanker’s owners have lost contact with the vessel. It is the latest escalation in the Middle East and puts geopolitical risk concerns back into the spotlight. The rise in /CLG4 comes despite a surprise U.S. inventory build, as reported by the Energy Information Administration yesterday.
Strategy (34DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 70.5 p Short 71 p Short 75 c Long 75.5 c | 22% | +370 | -130 |
Long Strangle | Long 70.5 p Long 75.5 c | 44% | x | -3970 |
Short Put Vertical | Long 70.5 p Short 71 p | 59% | +200 | -300 |
Symbol: FX | Daily Change |
/6AH4 | -0.36% |
/6BH4 | -0.16% |
/6CH4 | -0.13% |
/6EH4 | -0.19% |
/6JH4 | -0.37% |
Euro futures (/6EH4) turned lower against a dollar strengthened by this morning’s inflation numbers out of the United States, which cut the chances for numerous Federal Reserve rate cuts this year. With little European economic data due for the rest of this week, traders will keep their focus on the dollar ahead of wholesale price data due tomorrow.
Strategy (57DTE, ATM) | Strikes | POP | Max Profit | Max Loss |
Iron Condor | Long 1.07 p Short 1.075 p Short 1.115 c Long 1.12 c | 51% | +250 | -375 |
Long Strangle | Long 1.07 p Long 1.12 c | 34% | x | -750 |
Short Put Vertical | Long 1.07 p Short 1.075 p | 86% | +112.50 | -512.50 |
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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