The US stock market rallied this morning in anticipation of a Federal Reserve announcement that is expected to clarify the future path of interest rate rises. This gain comes after markets lost confidence when they learned that higher rates were on the cards.
On Wednesday morning, S&P 500 futures contracts rose by 1.2%, and those for the tech-focused Nasdaq 100 were up 1.8%.
The US central bank completes its latest interest rate meeting today and is predicted to signal a March interest rate rise. It has been speculated that officials may suggest a 0.5% increase in the rate at the next meeting or a 0.25% increase at each subsequent meeting this year.
As a result of higher interest rates, the S&P 500 index has fallen 9% this year. Technology companies have been hit the hardest as their models have been based solely on future profits, and actual profit figures have been lower than predicted.
The VIX, a standard measure of expected volatility, is inching down. It rose in the past week as markets fell.
SpotGamma today says put delta is nearing the put-heavy extremes from December 2018 and March 2020 levels.
When there is less demand for downside protection, the dealer’s exposure to positive delta declines. This exposure has the effect of shrinking implied volatility measures.
Disclosure: This article expresses my own views, and I wrote the article by myself. I am not receiving compensation for it. I have no business relationship with any company whose security is mentioned in this article.
Sources: FT.com, Bloomberg, MarketWatch, WSJ.com
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