The Week that Was: April 12 - April 16

A concise weekly overview of the U.S. equities and derivatives markets

Last week (April 12 to April 16), the broad markets continued to grind higher as earnings season kicked into gear. The Healthcare sector led the S&P 500 Index’s rise, while the Energy sector remained flat. Interest rates declined again last week, as the U.S. 10-year treasury yield fell below 1.55%. Meanwhile, retail sales data was strong and manufacturing data continued to impress. Additionally, the weekly jobless claims are improving, along with sentiment, according to the University of Michigan Consumer Sentiment Index, which reached new highs since the start of the pandemic last week[TC1] .  COVID-19 vaccination efforts hit a snag last week with the decision to pause inoculations of the Johnson & Johnson vaccine. However, shortly after, markets celebrated Pfizer’s announcement that it can deliver 10% more of its COVID-19 vaccines by the end of May.

Quick Bites

Indices

• U.S. Equity Indices were higher across the board with the Nasdaq Composite and S&P 500 Index outpacing the Russell 2000 Index.
• S&P 500 Index (SPX): Gained 1.37% and reached new all-time highs after tracing in a high-to-low range of 1.7% during the week. 
• Nasdaq 100 Index (NDX): Increased 1.42% last week as growth slightly outperformed value. The Nasdaq 100 Index also reached new all-time highs and is up 8.8% year-to-date.
• Russell 2000 Index (RUT℠): Increased 0.8% for the week and traded in a 2.9% range again last week. The Russell 2000 Index is 14.4% higher year-to-date.
• Cboe Volatility Index™ (VIX™ Index): Ranged between 17.91 and 15.38 last week. The VIX Index has declined every week for the past four weeks and implied volatilities have fallen consistently since late February.

Options

• SPX options average daily volume (ADV) was about 1.2 million contracts, in line with the previous week. 30-day SPX options implied volatility declined, and one-month at-the-money options are trading on a 12.65% implied volatility. 
• VIX options ADV was about 570,000 contracts last week, down from the previous week’s ADV of approximately 620,000 contracts. VIX options three-month ADV is 520,000.
• RUT options volume decreased week-over-week to an ADV of 33,800 contracts, compared to an ADV of about 41,000 contracts the previous week.

Across the Pond

• The Euro STOXX 50 Index gained 2% on the week.
• The MSCI EAFE Index (MXEA™) increased 1.6% and the MSCI Emerging Markets Index (MXEF™) was down 1.4% week-over-week.  

Charting It Out

Observations on VIX futures term structure and the stocks in the S&P 500 Index

• The VIX futures curve fell again last week and continued to steepen ahead of the April futures expiry on Wednesday, April 21.
• The April/May VIX futures spread settled at 2.85 wide, compared to 2.55 the week before.
• The April contract declined 1.35, to 17.10, while May fell 1.05, to 19.95.
• Despite low levels of realized volatility, the back of the VIX futures curve remains relatively high. The October 2021 VIX futures contract is currently the highest on the board at 24.20.

VIX Futures Term Structure

Source: LiveVol Pro

• 96.4% of stocks in the S&P 500 Index are above their 200-day moving averages – the highest measure ever. This increase is comparable to the rallies that followed the dot-com bottom and the global financial crisis.

Percentage of Stocks in the S&P 500 Index Above Their 200-Day Moving Average

Source: Charlie Bilello (@CharlieBilello on Twitter)

Macro Movers

• The U.S. 10-year treasury yield moved between 1.68% and 1.53% last week and rates ended the week at 1.57%. The 10-year treasury yield is now at five-week lows.
• WTI Crude Oil reached one-month highs last week as the June futures traded just below $64 per barrel. The International Energy Agency (IEA) boosted its 2021 demand forecast by 230,000 barrels per day to 5.7 million barrels per day.
• Lean hogs fell nearly 8% from mid-week highs and were limit down during Friday’s trading session.
• Big Tech: Apple, Amazon, Google, Microsoft and Tesla stocks all increased last week but Facebook fell 2% week-over-week. Microsoft is now worth $1.75 trillion, and Tesla has bounced up 37% from its intraday March lows.

Major Cryptos

• Bitcoin (BTC) prices ranged between roughly $64,500 and $60,000 last week, trading around $61,800 by the end of the week and establishing new highs.
• Ethereum (ETH) also reached new highs, trading between approximately $2,540 and $2,060 during the week.
• Dogecoin (DOGE) made headlines this week for its market cap of $44 billion, which has grown 8,000% in 2021. That makes the 113% gain in BTC and 230% rise in ETH, seem tame.
• Coinbase (COIN) went public last week with an $85 billion valuation. In its last round of private funding (2018) the company was valued at $8 billion. COIN revenues have increased nearly 1,000% year-over-year.

Coronavirus

• Over the past week there were about 71,000 new COVID-19 cases per day, compared to a seven-day average of 68,000 the week before.
• Michigan now accounts for roughly 10% of all new COVID-19 infections in the U.S. Globally, India is confronting a horrible outbreak.
• Vaccination numbers continue to improve, with roughly 3.3 million people in the U.S. receiving a COVID-19 vaccine each day.

Average Number of COVID-19 Cases in the U.S.

Source: The New York Times

Tidbits from the News

• Last month, the ICE Benchmark Administration (IBA) and Financial Conduct Authority (FCA) announced that LIBOR will “cease or no longer be representative for more LIBOR tenors” by June 2023. Banks are expected to stop writing LIBOR linked contracts by the end of this year. The Secured Overnight Financing Rate, or SOFR, is the presumptive replacement for dollar denominated debt in the U.S. but it has yet to gain much traction.

Trading Activity Tied to LIBOR Alternatives in March

Source: The Daily Shot

• U.S. labor markets are recovering. Last week’s jobless claims data was the lowest in 15 months, though claims remain well above pre-pandemic levels. Relatedly, retail sales data jumped about 10%, driven by stimulus spending and more people returning to the workforce.

Weekly Initial Unemployment Claims in the U.S.

Source: St. Louis Federal Reserve and Chartr

The Week Ahead

• Data to be released this week: Weekly Jobless Claims and Existing Home Sales on Thursday and Manufacturing and Services Purchasing Managers Index (PMI) on Friday.
• Earnings will continue to garner significant attention following the strong performance from the Financials sector last week.

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