The Week that Was: June 7 to June 11
A concise weekly overview of the U.S. equities and derivatives markets
Last week (June 7 – June 11), a meaningful decline in interest rates was seemingly the catalyst for U.S. equity markets to climb higher. Growth stocks and healthcare outperformed, while financials underperformed. Pharmaceutical company Biogen received approval for an Alzheimer’s treatment, which provided a boost to the Pharmaceutical sector. Annual inflation numbers increased 5.0% and hit 13-year highs. The ramp up in automobile prices has been substantial, but longer-term inflation metrics remain tame. Meanwhile, the U.S. Senate apparently reached a consensus on an infrastructure plan that is about 40% of the size of the Biden administration’s original plan and would not raise corporate taxes. The Federal Reserve meets this week and market participants are expected to key in on the Fed’s assessment of inflationary pressures.
- U.S. Equity Indices moved higher again last week. The S&P 500 Index established new highs and the Nasdaq 100 Index (NDX) and Russell 2000 Index (RUT) closed just below their March 2021 highs.
- S&P 500 Index (SPX®): Increased by 0.4%, closing at new highs. The index measured in a narrow 1.0% range relative to the previous Friday’s close. Short-term 10-day realized volatility moved to the lowest levels since November 2019.
- Nasdaq 100 Index (NDX): Gained 1.7% last week as rates fell and growth stocks led the market higher again.
- Russell 2000 Index (RUT℠): Gained 2.1% last week. The small cap index measured in an unusually low 2.8% high-to-low range last week and closed 1% off its March 2021 all-time highs.
- Cboe Volatility Index™ (VIX™ Index): Moved between 18.29 and 15.15 last week and closed at 15.65, the lowest weekly close since February 2020.
- SPX options average daily volume (ADV) was about 1.14 million contracts, which was slightly higher than the week prior. The one-week at-the-money SPX options straddle (4250 strike with a 6/18 expiration) settled at 40.25 (7.8% implied volatility) which implies a +/- range of about 1.0%.
- VIX options ADV was about 540,000 contracts last week, up from the previous week’s ADV of 450,000 contracts. VIX options calls traded 1.17 times for every 1 VIX options put.
- RUT options volume increased week-over-week to an ADV of 40,000 contracts, compared to an ADV of about 38,900 contracts the previous week.
Across the Pond
- The Euro STOXX 50 Index gained 0.3% on the week and established new highs.
- The MSCI EAFE Index (MXEA℠) advanced 0.3% week-over-week to reach new highs and the MSCI Emerging Markets Index (MXEF℠) decreased 0.6% week-over-week.
Charting It Out
Observations on VIX futures term structure
- VIX futures declined across maturities with multiple new contract lows.
- The Month-1/Month-2 spread settled at 2.95 wide, compared to 2.15 the previous week. The June VIX futures fell 2.40 week-over-week, July declined 1.60 August fell 1.30 and September lost 1.20.
- The June VIX futures and options will expire and cash settle on Wednesday, June 16.
VIX Futures Term Structure
Source: LiveVol Pro
- The U.S. 10-year treasury yield declined another leg lower last week as rates declined by 10 basis points relative to the June 4 settle, closing the week at 1.46%. Intraday Friday lows were 1.43%. These are the lowest levels for the 10-year yield since early March 2021.
- The S&P GSCI (commodity index) was essentially unchanged on the week. Natural gas led the commodity markets higher with a 6.4% gain. Cotton, Cattle and Crude Oil all settled higher, as well. The Soybean complex (Meal and Oil) declined.
- Lumber futures have fallen approximately 40% over the past month, following an unprecedented gain.
- Big Tech stocks were higher across the board last week. Apple, Amazon, Microsoft, Google, Tesla and Facebook all closed higher.
- Facebook was only fractionally positive, and Tesla pushed back over the $600 mark but remains 30% below its early January highs of about $900 per share.
- Bitcoin (BTC) values were largely unchanged relative to June 4 close of about $37,000. BTC fell as low as about $32,500 mid-week. Lows from late May were around $31,000.
- Ethereum (ETH) moved between $2,800 and approximately $2,350 as weekly volatility declined. ETH closed near $2,400 on June 11, which was lower than the previous Friday’s close.
- The daily vaccination rate in the U.S. is around 1.1 million, compared to a peak in mid-April of about 3.3 million.
- The 7-day moving average declined from approximately 15,000 to approximately 13,500 – the lowest 7-day average since late March 2020.
- 43% of the U.S. population is fully vaccinated and 52% has received at least one dose of a COVID-19 vaccine.
- South America is currently a COVID-19 hotspot, with relatively high rates of infections and mortality.
Average Number of COVID-19 Cases in the U.S.
Source: The New York Times
Tidbits from the News
- Despite the inflationary pressure observed in the markets – especially commodities – over the past six months, Uranium remains well below its 2007/2008 highs. Recently, hedge fund Anchorage Capital announced it investment in physical uranium, which could be construed as an “alternative energy” investment based on expectations of more nuclear power demand.
Price of Uranium from 2000 to 2021
Source: Trading Economics
- Job openings hit a new record high last week, according to data collected since 2000. A general willingness to quit jobs is a signal of a strong labor market. However, wages may continue to rise, which could push inflation measures even higher. Pandemic-related assistance programs are ending in many states and most will expire by Labor Day 2021.
U.S. Job Openings Rate from 2000 to 2021
Source: The Daily Shot
- Netflix topped the list of the S&P 500 Index’s best performing stocks over the last 30 years. Monster Beverage Corp. came in second.
Best Performing Stocks in the S&P 500 from 1990 to 2021
The Week Ahead
- Data to be released this week: Retail Sales, Producer Price Index and National Association of Home Builders (NAHB) Builders Index on Tuesday; Housing Starts and Federal Open Market Committee (FOMC) press conference on Wednesday; Weekly Jobless Claims, ADP Employment Report, Philly Fed and Leading Economic Indicators on Thursday.
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