The Week that Was: January 17 to January 21

Kevin Davitt
January 24, 2022

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

Last week (January 17 – January 21), U.S. equity markets came under significant pressure and volatility measures climbed. It was the largest weekly decline for the Nasdaq Composite since March 2020 and the S&P 500 Index and Russell 2000 Index suffered through their worst weeks since October 2020. Value stocks have outperformed growth names for the fourth consecutive week. Oil prices moved to the highest levels since 2014, which could start to infringe on other consumer spending. Last week was the 17th largest weekly percentage change in the VIX Index since 1990. On average, the S&P 500 Index has gained 0.90% the following week, when looking at the top 20 most significant VIX Index jumps. The largest gain was 4.61% in October 2008.

Interest rates remained relatively rangebound, but short-term rates continue to push higher. The U.S. Treasury yield curve has demonstrably flattened over the past few months. The Federal Reserve is expected to wind down its monthly asset purchase program in the next two months and potentially raise the Fed Funds Rate late in the first quarter or early in the second quarter. There’s increasing speculation that the Fed could move by 50 basis points in an effort to stem inflationary pressures.

Economic and earnings data were mixed. For example, there was Strong Housing Starts data, but weaker Pending Home Sales and the Weekly Jobless Claims increased unexpectedly. Earnings data was also mixed. JP Morgan and Goldman Sachs sold off the most. Big picture concerns about valuation (Price/Earnings ratios) and slower growth remain.

The earnings calendar is packed over the next two weeks. Apple, Tesla and Microsoft are all slated to report this week. Outside of quarterly reports, all eyes are now on Federal Reserve Chair Jerome Powell ahead of the January 25 and 26 Federal Open Market Committee meeting.

Quick Bites


  • U.S. Equity Indices suffered the worst weekly performance in over a year.
  • S&P 500 Index (SPX®): Decreased 5.7% week-over-week, the most significant weekly decline since late 2020.
  • Nasdaq 100 Index (NDX): Declined 7.5% week-over-week, marking the worst week for the Nasdaq 100 since March 2020.
  • Russell 2000 Index (RUT℠): Decreased 8.13%. week-over-week.
  • Cboe Volatility Index (VIX™ Index): Moved significantly higher.


  • SPX options average daily volume (ADV) was 2 million contracts per day, higher than the previous week’s average of 1.56 million contracts per day. The one-week at-the-money (ATM) SPX options straddle (4,395 strike with a 1/28 expiration) implies a +/- range of about 3.1%.
  • VIX options ADV was about 800,000 contracts last week, which was significantly higher than the previous week’s ADV of 420,000 contracts. The VIX options call-put ratio was 1:1.
  • RUT options ADV was 78,900 contracts, up from the previous week’s ADV of 52,400.

Across the Pond

  • The Euro STOXX 50 Index decreased 3%.
  • The MSCI EAFE Index (MXEA℠) decreased 1.9% and the MSCI Emerging Markets Index (MXEF℠) decreased 1% week-over-week.

Charting It Out

Observations on VIX futures term structure

  • The VIX Index increased by nearly 10 handles on the week and closed slightly below 29. During the week, the VIX Index ranged between 29.79 and 21.18.
  • The January VIX futures expired on Wednesday at 22.25.
  • The VIX futures curve closed the week backwardated. February (Month-1) is now the most active VIX futures contract and settled at 27.35. The March (Month-2) VIX futures closed at 26.90. When front month futures are at a premium to further dated maturities, the curve is backwardated. As of Friday, the curve was at a 0.45 inversion.

VIX Futures Term Structure

Source: LiveVol Pro

Macro Movers

  • The U.S. 30-year Treasury yield closed at 2.08%, down 4 basis points week-over-week. The U.S. 10-year Treasury yield ranged from 1.89% to 1.73% and closed at 1.77% for the third Friday in a row. The 2-year Treasury yield moved from 97 basis points up to 101 basis points as short term rates continue to climb. The upcoming Federal Open Market Committee (FOMC) meeting on January 25 and 26 could set the tone for short term rates going forward.
  • The U.S. Treasury yield curve continues to flatten. Short term rates have climbed more quickly than longer dated rates. The 30-year/10-year spread is back to 30 basis points wide, the narrowest spread since early 2019.
  • The GSCI Index gained another 2.0% last week. Grains, Softs and Metals all rallied. WTI Crude Oil traded to the highest levels since 2014 and then sold off slightly. Nevertheless, Crude Oil was higher on the week.
  • Silver prices jumped 6%. Palladium climbed 1%. Natural Gas futures fell more than 7%.
  • The U.S. Dollar Index (DXY) was slightly higher last week.
  • Big Tech came under big pressure last week. Higher interest rates, macro volatility and technical breakdowns all weighed heavily.

Major Cryptos


  • Last week Bitcoin (BTC) traded between $43,800 and $37,500. The cryptocurrency market fell to six-month lows amidst broader asset class volatility. 
  • The 52-week lows for BTC are around $30,000.
  • Relative to the previous Friday, BTC declined by 11.2%.


  • The Ethereum and Bitcoin charts look nearly identical. Both made weekly highs on Monday, then crypto prices plummeted on Friday.
  • ETH ranged between $3,400 and $2,700 last week and ended the week around $2,700, down more than 16%.  
  • The 52-week lows in ETH are around $1,000.

Digital Asset Industry

  • Digital assets have arguably benefited from easy monetary policies in the wake of the COVID-19 pandemic. Sentiment has shifted in recent weeks since the FOMC focused its attention on fighting inflation.
  • Interest rates have been surging domestically and globally. Alternative currencies have lost some luster against the prospect of tighter monetary policy.
  • On Thursday, the Central Bank of Russia proposed a ban on both cryptocurrency use and mining.


  • The 7-day average COVID-19 infection rate in the U.S. rolled over. The average moved to approximately 735,000 per day on January 21, down from approximately 803,000 per day the week prior.
  • 63% of the U.S. population is fully vaccinated against COVID-19 and 75% have received at least one dose of a COVID-19 vaccine. For just those 12 years and older, the numbers are 72% and 85% respectively.
  • More than 150,000 people are currently hospitalized as a result of COVID-19, the highest level ever.
  • The situation in the Northeast and Upper Midwest is arguably improving. Caseloads in New York City, Washington D.C. and Chicago have declined. However, the Omicron variant now appears to be moving south and west.
  • Furthermore, the caseloads may be significantly undercounted as many people are using at-home tests.
  • Last week the U.S. government opened a portal to access free over-the-counter COVID-19 tests. The government also plans to make 400 million N95 masks available for free starting next week.

COVID-19 Cases in the U.S.

Source: The New York Times

Tidbits from the News

  • Venture capital is an offshoot of private equity investing. It tends to be high risk, high reward. Venture capital groups raise money and allocate those funds into smaller businesses that have significant growth potential. It’s been quite the decade for venture capital (VC) funding. In 2011, there was about $50 billion allocated in VC funds. That allocation grew to $167 billion by 2020 and doubled in 2021. Last year, $330 billion in VC funds were invested into start-ups and early stage companies in the U.S.

Venture Capital Funding in the U.S.

Source: Pitchbook and Chartr

  • The daily correlation between the small-cap Russell 2000 Index and the Big Tech Nasdaq 100 Index is near record levels. In other words, when the small-cap index moves up, the tendency is for large-cap tech to do the same (and vice versa). Over the past year, this measure has moved from a record low (negative correlation between the two indices) to a current record high. Correlations tend to strengthen (move closer to 1.0) when volatility increases, but this relationship predates the more recent macro volatility.

Russell 2000 Index and Nasdaq 100 Index Correlation

Source: Nasdaq Dorsey Wright

  • One bright byproduct of the global pandemic: U.S. entrepreneurship is on the rise. According to recent data from the U.S. Census Bureau, last year, roughly 5.4 million Americans filed new business paperwork with the Internal Revenue Service (IRS). That compares to 4.4 million in 2020 and 3.45 million in 2019. Last year marked the highest total new business applications since tracking began in 2004. Transportation and Warehousing saw the largest jump, followed by property businesses. Retail Trade suffered a significant decline.

Increases in U.S. Entrepreneurship

Source: Census Bureau & The Economist

The Week Ahead

Data to be released this week: Purchasing Managers Index (PMI) Services and Manufacturing on Monday; Case-Shiller Home Price Index and Consumer Confidence Index on Tuesday; New Home Sales, Federal Open Market Committee Statement and Press Conference on Wednesday; Initial Jobless Claims, Durable Goods and Fourth-Quarter U.S. Gross Domestic Product (GDP) on Thursday; Personal Consumption Expenditure (PCE) Inflation, Employment Cost Index and University of Michigan Consumer Sentiment Index on Friday.

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