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Today, we saw the S&P 500 fall by about 60 basis points, while the Nasdaq 100 declined by approximately 85 basis points. Nvidia was the leading stock, dropping 2.5% after China launched a monopoly probe into the company. Nvidia accounted for about 25% of the decline in the Bloomberg 500 indexes, which serve as proxies for the S&P 500.
U.S. 10-year Treasury yields rose slightly, closing at around 4.20%, up by about five basis points. The dollar index also gained, rising by roughly 20 basis points. Two-year inflation swaps increased slightly to 2.56%, continuing to hover within the 2.55%–2.60% range seen in recent weeks. These levels remain a focus as we approach Wednesday’s CPI report. Current expectations are for a 0.3% month-over-month increase and a 2.7% year-over-year rise—both slightly higher than October’s readings. Core CPI is projected to remain in line with the previous month at 0.3% month-over-month and 3.3% year-over-year. Additionally, we’ll receive PPI data on Thursday and import/export price data on Friday, making this a key week for inflation indicators.
Credit spreads widened slightly, with CDX high-yield spreads increasing by 3.5 points to 292 basis points. While still depressed, these levels are worth monitoring for potential shifts in market sentiment.
The one-month implied correlation index rose nearly 2 points to just over 10, still at low levels but trending higher. Other volatility metrics followed suit, with the VIX climbing 1.5 points to 14.20. Realized volatility also ticked higher, with 10-day realized volatility closing up about 1 point to 7 and 20-day volatility rising to 8. These moves suggest that volatility, while still relatively subdued, is beginning to show signs of life as the market remains range-bound.
On the technical side, the S&P 500 tested significant support at 6,050, filling a gap created on December 4. The index broke out of a diamond reversal pattern, signaling the potential for further declines. A break below 6,050 could pave the way to 6,000 or lower, where additional gaps remain. The broader concern lies with the rising wedge pattern since August, which appears to be nearing its conclusion.
Similar conditions persist in the Nasdaq, where the rising wedge pattern also appears close to resolution. The coming days will be crucial in determining whether the market breaks lower.
Have a great evening, and see you next time!
-Mike
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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