Inflation rises 7.5% over the past year, even more than expected, according to CPI. The reading was expected to be at 7.2%. Yields spiked and the NASDAQ traded lower on the new. The market is now pricing in 6 rate hikes in 2022 (1.5% in total). Bitcoin also reacted to this showing us the ongoing correlation to risk assets like the majority of NASDAQ holdings.
With option expiration next week we could see the market begin to get pinned here, especially after this mornings selling pressures. The SPY is relatively pinned in the 450/460 range but dealers have QQQ to sell on declines, and QQQ to buy on rallies. This invokes higher relative volatility to the more neutral S&P.
Our base assumption for today is that the “event volatility” around the CPI number burns off, which kicks in positive vanna flows and gamma hedging into the 4600 area. This would signal a continued rotation in options positions to higher strikes which drags markets up. For the downside, based on today’s volatility estimate it would likely take multiple sessions to initiate a major selloff from here – we’d first have to stage today down near the 4500 line (~1% lower) which would position the market for a more significant decline tomorrow. In other words: due to the gamma position we see less downside tail risk for today. - SpotGamma
IRNT +21.7%, TWLO +19.7%, MQ +11.2%, MAT +10.6%, DIS +7.7%
- Looking for the continuation in both MU and VZ (Open Swing Positions).
BAC ripped on the CPI data, we will look for the gap and go setup on BAC after possible morning selling.
- Given the market shrugs off CPI data, we can look to position in CHWY and RBLX as they both had significant breakouts yesterday.
- Watching XOP for moves on Oil where we will position in OXY to capture any moves.
ARCH strong in premarket pushing into All-Time-Highs, looking to play the possible continuation with breakout over 111.83. Currently trading at 111 in premarkets.
- And of course, if we see significant selling pressure on technology we will look to trade QQQ puts or other technology shares such as DIS, MSFT, or AAPL to capture the downside moves.
US Corp News
Walt Disney (DIS 158.00, +10.77): +7.3% after beating top and bottom-line estimates and growing total Disney+ subscribers by 37% yr/yr to 129.8 million.
Coca-Cola (KO 61.80, +0.76): +1.3% after beating top and bottom-line estimates and guiding FY22 EPS above consensus.
Twilio (TWLO 243.99, +41.98): +20.8% after eating top and bottom-line estimates and guiding Q1 revenue above consensus. Q1 EPS guidance was below consensus.
Uber (UBER 42.50, +2.31): +5.8% after beating top and bottom-line estimates and saying, “Mobility is already starting to bounce back.”
Mattel (MAT 25.26, +2.51): +11.0% after beating top and bottom-line estimates and guiding FY22 EPS and revenue above consensus.
- Twitter (TWTR) misses by $0.01, reports revs in-line; guides Q1 revs in-line; authorizes new $4 bln share repurchase program which includes $2 bln ASR; reiterates long term mDAU target
- CDC is in disagreement with governors that are removing mask mandates and is working on new guidance, according to the New York Times
- New York City, Los Angeles, and San Jose will continue with mask mandates despite their states removing them, according to the Wall Street Journal
- Chicago will end vaccine requirement for patrons of restaurants and bars 2/18