We have some ground to cover
November 3, 2022
–Powell’s catchphrase was “we have some ground to cover”. EDH3/M3 settled at a new high of -0.5, having recently been as low as -10.5, and SFRH3/M3 at 0.0; pricing for possible easing in Q2 is getting squeezed out. On the other hand, more deferred calendars made new lows. For example, SFRM3/SFRM4 settled -83.5, so while Powell says more to come, the market is interpreting that to mean that easing will surely follow. Powell repeated these messages a couple of times: “…very premature to be thinking about pausing”… “ongoing rate increases are still appropriate”. He also said that it’s tough to make the case that the Fed is too tight [but a new low in 2/10 at -51 is making exactly that case]. Timiraos asked, “…with Core CPI at or near 5%, does the Fed have to move FF above that rate?” Powell deftly sidestepped that one…but emphasized “we will stay the course until the job is done.” Stocks were shellacked, SPX -2.5% and Nasdaq Comp -3.4%.
–On Monday there was a buyer of 20k 0QZ3 9500p for 9.5 on a block ref 9548-ish. Yesterday those puts were exited, sold at 7.0 to 5.5 covered 9548.5, 40k. With SFRZ3 final settle 9532.5 yesterday, the puts settled at the original buy price, 9.5, a harsh Indication of vol being smoked. On Monday the atm 0QZ2 9550 straddle settled 51.5, yesterday the atm 9531.25^ settled 44.75.
–Today, Jobless Claims expected 220k, Productivity, and ISM Services, expected 55.5.
