Deep freeze in Chicagoland, but only a dusting of snow
December 23, 2022
–It’s -6 farenheit, -21 celsius.
–Weakness in stocks yesterday abated slightly near the end of the session. SPX ended -1.45% and Nasdaq Comp -2.2%. Yields ended slightly higher with SFRM3 weakest on the strip at 9515.0, down 5 on the day. March’23 is the lowest contract, settling 9514.5, down 3.5. Q3 GDP was revised slightly higher and Core PCE prices came out 4.7% vs expected 4.6%. However, some of the weakness was attributed to David Tepper’s interview on CNBC when he said he leans short stocks (against his normally optimistic outlook) and is heeding what central banks are saying in terms of further tightening intentions.
–Today PCE prices are released, expected yoy 5.5 from 6.0 last, and Core 4.7 from 5.0. Japan’s Core CPI is at a 40 yr high 3.7% (with ten year JGB around 40 bps).
–As mentioned SFRH4 settled 9514.5, with a decent amount of buying yesterday of put spreads, for example 20k 9500/9475 ps for 4.75 (4.5s) and 9500/9481.25ps (3.75s). If the Fed were to hike 50 at the Feb 1 FOMC then these put spreads might be reasonable, but FFG3 settled at 9535.0 and really hasn’t deviated much from that price since the last FOMC. Still leans heavily toward only 25 at the Feb 1 FOMC, which would put EFFR 458.
