Unsteady Ground: Volatility Takes Center Stage in a Choppy Trading Session

Volatility Leads to Choppy Session 

Overnight, equity indices experienced a significant decline, with many investors discovering that the S&P 500 futures had fallen by over 2% upon waking. This downward movement occurred prior to the release of the Producer Price Index (PPI) data. At 8:30 AM Eastern Time, the PPI figures were revealed, indicating a considerably lower value than anticipated. The year-over-year PPI was initially projected to be 6%, but the actual figure came in at 4.6%, representing a notable deviation in a market that has recently been lacking positive news. Additionally, the month-over-month PPI was expected to be 0.7%, but the actual data showed a -0.1% change.

PPI Provides Positive Reaction

As Sam Shames, Vice President of Options at Simpler Trading, noted, the PPI often serves as a leading indicator for upcoming U.S. Consumer Price Index (CPI) data. While the impact may not be evident in the immediate CPI report, a sustained trend could result in a cooling CPI in the months to come. This relationship is based on the premise that producers typically report lower figures before consumers do. For instance, if a company experiences a decrease in production costs, the price of its product may be reduced for consumers in subsequent months.

Following the release of the PPI report, the market gradually inched upward as trading commenced. Although the PPI data provided a positive impetus, the market remained cautious. The S&P 500 futures experienced a morning of volatility, trading within a narrow 25-point range, as investors weighed the negative macro sentiment against the positive micro catalyst. It was not until mid-afternoon that the market positioned itself for a potential uptick.

Nasdaq Continues to Show Strength 

During the rally, the S&P 500 futures managed to surpass the significant 3,900 threshold, propelling the market further upward. Following this breakthrough, the index experienced a 30-point increase, nearly doubling the day’s range prior to that moment. Notably, the Nasdaq futures turned positive, reflecting the ongoing resilience of the technology sector amidst recent market volatility.

Understanding that volatility is neither inherently positive nor negative is crucial for successfully navigating the current market landscape. Maneuvering through such a challenging environment can be demanding for those lacking experience. Simpler Trading is home to a team of skilled traders dedicated to assisting individuals in traversing even the most tumultuous markets. Offering an abundance of guidance, expertise, and support, the Simpler Trading Options Trading Room serves as an invaluable resource during these uncertain times.

Economic Data for Tomorrow 

Tomorrow, another economic data event will provide even more volatility during an Options Expiration (OpEX) week. At 8:30 a.m. Eastern, weekly Initial Jobless claim numbers will be released. With rate hike numbers to be released around the corner, the Federal Reserve (Fed) will digest this information before deciding next week.

Economic Data for Tomorrow 

Tomorrow, another economic data event will provide even more volatility during an Options Expiration (OpEX) week. At 8:30 a.m. Eastern, weekly Initial Jobless claim numbers will be released. With rate hike numbers to be released around the corner, the Federal Reserve (Fed) will digest this information before deciding next week.

Cash Session Moves Higher, Still Closes Negative

The Nasdaq closed positive, while the S&P 500 was negative to close the session. The S&P 500 futures closed down 0.77%, losing 31 points, while the Nasdaq futures closed up 0.43%, adding 54 points. The Dow Jones futures closed negative, down 1.04%, losing 337 points.