Why stocks jumped 5% in one day

(Bloomberg) — The shocking reversal in stocks made Wall Street search for anything else to explain how another hot inflation figure turned into one of the best days of the year. A well-prepared hedge, watershed moments for chart-watchers, and solid positioning including a few not-so-bad earnings reports. Short covering, as a result, rose from the lows to the highs of the S&P 500 futures, reaching a maximum of 5.6%. This is a direction that includes the Fed, which is half-opened to financial stability while committed to containing inflation. Thursday’s turnaround saw the S&P 500 rebound from its 2020 pandemic trough, and the blow to wealth doesn’t show any signs of holding back inflation yet, but it could one day help achieve that goal. Sometimes you get big swings during the day. “We can all guess what’s behind it,” said Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. There are more short-term funds in the market and more money moving based on algorithms, quantitative strategies. And at any time you can pull the trigger that can trigger a 180 in the middle of the day.” Professional traders have been busy limiting their exposure to surprise moves, calling the stock’s direction near-impossible. According to Sundial Capital Research, institutions bought more than $10 billion of put options on individual stocks last week, close to the group’s record and the highest volume of any trader cohort. The story continues There is circumstantial evidence that these bets paid off in the immediate aftermath. The government’s CPI report showed higher-than-expected inflation. While stock futures were selling, the Cboe Volatility Index, a measure of market unrest associated with S&P 500 options, actually fell, potentially signaling a profit taking for hedgers. And as these positions became monetized, market makers were forced to release their short positions to maintain a neutral market position. “It’s a very well hedged event. It’s a transaction like passing an event, selling a hedge, or contributing to a market rally.” Elsewhere, the clutch of technical signals was on the bull side, including the 50% retracement of the 22-month rally that occurred in the S&P 500. When the index fell below the 3,517 line in March 2020, some market observers took it as a sign that the nine-month sell-off was too much. It has been a bull and bear front in recent weeks. Ellen Haze, Senior Market Strategist and Portfolio Manager at FLPutnam Investment Management, said in 2016 and 2018 that the long-term trendline stopped the S&P 500’s major declines. “There is so much uncertainty in the market and there are so many conflicting data points that the market reacts to the most recent,” she said. It is the first time since July that the S&P 500 abolished an intraday decline of more than 2%. It is characteristic of a wild swing in the stock market in 2022, as traders struggle to speculate on the Fed’s policy path and its impact on the economy. The index posted 2% reversal days, either up or down six times since January, the toughest year since the 2008 financial crisis. While supporting tactical traders, it was the brutal market in 2022 that half of the bull market’s bounty was cleared. The S&P 500 is at risk of losing more than the third 20% of the century. As the dream state that has dominated markets since the Covid-19 outbreak is slowly unraveling, investors are exposed to the effects of a very aggressive Fed and bubble-like valuations. . As the third quarter reporting season kicks off in earnest, Delta Air Lines Inc. and better-than-expected results on Thursday from companies like Walgreens Boots Alliance Inc., the bulls could signal. Despite this year’s $15 trillion loss, stocks are far from calling to buy. The index multiple of 17.3 times earnings is higher than the lows seen in all 11 previous bear cycles, according to data compiled by Bloomberg. In other words, if stocks recovered from here, this bear market floor would have been the most expensive since the 1950s. FOMO drives people to chase this rally,” said Larry Weiss, Head of Equity Trading at Instinet. “Unfortunately, there is plenty of time to ruin this rally.” (Full price update) Bloomberg Businessweek ©2022 Bloomberg LP Most Read Articles
#stocks #jumped #day

Leave a Comment

Your email address will not be published. Required fields are marked *