Stocks wobble; stir traders cover shorts
January 28, 2025
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–Stock rout sparked by China’s DeepSeek. SPX -1.46%, Nasdaq Comp -3.07% and NVDA -17%. Major indices aren’t even close to the early January lows. In fact, DJIA squeaked out a small gain on the day and is near the all-time high set in December. WMT set a new ath.
–Quote from Kuppy (@hkuppy)
“Throughout my career, any industry that China enters, they take margins to zero and steal all the market share. From solar panels to autos, they’re unstoppable. Now they’ve set their sights on semis…”
–Rate futures rallied, with reds (2nd year forward) leading, +11 on the day. SFRH6 is the peak contract at 9615 or 3.85%. The lowest one-year calendar is SFRH5/H6 which settled -36. down 10 on the day (9579/9615). FFG5 at 9567.5 was unchanged, so there’s almost zero chance of an ease tomorrow, but odds for March edged slightly higher. FFJ5 settled 9575.5, +1.5. A price of 9579.5 would represent 50/50 odds for a 25 bp ease at the March 19 FOMC. One year forward FFG5 settled 9619.0 (+9.5) or 3.81%, 52 bps below current EFFR of 4.33%.
–Buyer of 35k SFRU5 9637.5/9662.5cs for 4.5 was a cover. Settled 4.5 vs 9607.5 in U5. In SOFR futures open interest was down 134k, so there was a lot of short-covering in nearer contracts. SFRU5 thru SFRU6 shed 110k. However, TY added 54k in open interest. 10y yield fell 9.5 bps to 4.526%. Implied vol pushed modestly higher after sinking last week.
–Today’s news includes Durables and Consumer Confidence. 7 year auction. FOMC tomorrow.
–Below cited by Alyosha / market vibes:
“For the first time on record, the majority of all trading in US stocks is now consistently occurring outside the country’s exchanges,” according to data compiled by Bloomberg on 1/25/2025.
In terms of regulatory zealotry, I’d guess a few infractions may be slipping through some pretty big cracks.
