Cboe Global Markets

The Week that Was: August 9 to August 13

Kevin Davitt
August 16, 2021

A concise weekly overview of the U.S. equities and derivatives markets

Last week (August 9 – August 13), was another rangebound week for U.S. equities in which value outperformed growth. Stocks mostly gained ground as market participants largely dismissed the potential impact of increased COVID-19 infections. In terms of sector performance, Materials led and Energies lagged.

Consumer Price Index (CPI) data decelerated in July and core inflation numbers, excluding food and energy, registered +0.3%, giving credence to the overall transitive inflation narrative. Meanwhile, the Senate passed a $1 trillion infrastructure bill, which includes about $550 million in new spending. The bill now moves to the House, as Democrats in the Senate move forward with trying to advance a proposed $3.5 trillion budget. In the week ahead, the release of meeting minutes from the latest Federal Open Market Committee (FOMC) meeting may provide insight about the Federal Reserve’s continued asset purchases. 

Quick Bites

Indices

  • U.S. Equity Indices ended a calm week with mostly small gains.
  • S&P 500 Index (SPX®): Increased 0.7% week-over-week.
  • Nasdaq 100 Index (NDX): Increased 0.2% week-over-week. 
  • Russell 2000 Index (RUT℠): Decreased 1.2% last week.
  • Cboe Volatility Index (VIX™ Index): Moved in a narrow range of 17.39 and 15.19 last week and closed at 15.45.

Options

  • SPX options average daily volume (ADV) was about 1.14 million contracts, which is slightly higher than the previous week’s ADV of approximately 1.12 million. The one-week at-the-money (ATM) SPX options straddle (4470 strike with an 8/20 expiration) settled at around 31.5, which implies a +/- range of about 0.7%. The weekly ATM straddle settled on a 7.3% implied volatility.
  • VIX options ADV was about 540,000 contracts last week, which was higher than the previous week’s ADV of 320,000 contracts. VIX options call volume was in line with put volumes.
  • RUT options ADV was 52,600 contracts, compared to an ADV of 45,600 contracts the previous week. The 1-week ATM straddle implies a range of 1.8% ahead of the 8/20 weekly expiry.

 Across the Pond

  • The Euro STOXX 50 Index gained 0.7% on the week, marking four straight weekly advances for the STOXX Index.
  • The MSCI EAFE Index (MXEA℠) increased 1.6% week-over-week and the MSCI Emerging Markets Index (MXEF℠) decreased 0.8% week-over-week.  

 Charting It Out

Observations on VIX futures term structure

  • The VIX futures curve continues to fall and steepen in the front terms as the August/September VIX futures spread moved from 2.00 wide out to 2.90 week-over-week.
  • The August VIX futures fell 2.1 handles and September VIX futures declined by 1.2. The October contract declined by 1 point.
  • The front-month contract will expire and cash settle on Wednesday, August 18.
  • The lowest monthly settle in 2021 was 16.38 (June). You have to go back to January and February of 2020 for lower VIX Index settlement prints (12.62 and 14.51 respectively).

Source: LiveVol Pro

Macro Movers

  • The U.S. 10-Year Treasury Yield vacillated between 1.38% and 1.27%, ultimately ending the week higher by one basis point at 1.30%.
  • The S&P GSCI was essentially unchanged week-over-week. Sugar and wheat prices were higher. Gold was higher, while silver futures fell. Crude oil continues to move lower and natural gas declined as the longer-term forecast calls for cooling. Lumber prices are now down 30% year-to-date, reaching new 2021 lows.
  • The U.S. Dollar Index was higher for much of the week but gave back those gains on Friday. The index ended the week fractionally lower but remains at 4-month highs.
  • Nearly all of the Big Tech leaders in the S&P 500 Index were higher on the week.
  • Tesla gained 2.6%,  Apple increased 2.0% and Google and Microsoft climbed 1.5% and 1.2% respectively.
  • Amazon fell 1.6%. Facebook, which led last week, lagged, ending the week lower by 0.5%. 

Major Cryptos

  • Bitcoin (BTC) prices climbed another 8%, relative to Friday, August 6. Bitcoin has added about 50% since its July 20 lows of approximately 30,000. As of August 13, BTC is trading near $46,300.
  • Ethereum (ETH) is up nearly 90% from its late July lows. The second largest cryptocurrency has significantly outpaced BTC in recent weeks and gained 10.3% on a week-over-week basis.
  • In other crypto news, a hacker who made off with about $600 million worth of digital currency returned the funds and said they did it for fun.

Coronavirus

  • The U.S. 7-day average infection rate rose from approximately 105,000 a week ago to approximately 126,000 on August 13.
  • Testing and vaccination numbers continue to increase as well. COVID-19 tests are up 50% over the last two weeks and COVID-19 vaccination numbers are back up to 500,000 per day. Vaccination efforts have picked up significantly in Arkansas, Louisiana, Alabama, and Mississippi.
  • 50% of the U.S. population is fully vaccinated against COVID-19 and 59% have received at least one dose of a COIVD-19 vaccine. For just those 18 years and older, the numbers are 62% and 72% respectively.
  • Globally, the 7-day average infection rate moved from approximately 605,000 to about 644,000.

Source: The New York Times

Tidbits from the News

  • Just over one year ago, single stock option volume exceeded single stock share volume for the first month ever. Over the past 13 months, that ratio has ebbed slightly in favor of options volume about half the time (six months). In July 2021 equity options volume was nearly 40% higher than equity volumes, marking yet another record.

Options Volume/Share Volume for Single Stocks

Source: Goldman Sachs/@SoberLook

  • U.S. poverty rates have been declining since the global financial crisis and this year will likely bring about a historic decline in poverty. The combination of stimulus payments, broader access to food stamps, new child tax credits and enhanced unemployment benefits will drive poverty rates significantly lower.

Three-Year Change in U.S. Poverty Rate

Source: New York Times and Scott Galloway

  • The National Retail Federation anticipates 2021 “Back to School” spending of approximately $37.1 billion, which would be an 8.8% year-over-year increase. Much of the spending is funneled toward clothing and electronics.

U.S. Back to School Spending

Source: Statista

The Week Ahead

Data to be released this week: Empire State Manufacturing Index on Monday; Retail Sales and National Association of Home Builders (NAHB) Home Builder Index on Tuesday; Federal Open Market Committee (FOMC) Meeting Minutes on Wednesday; Weekly Jobless Claims and Philly Fed Manufacturing Business Outlook Survey on Thursday.

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