Goldman Sachs: Trading Desk (01/16/2025)
S&P -21bps closing at 5937 with MOC of $400M to buy. NDX -69bps at 21091, R2K +15bps at 2266 and Dow -16bps at 43153. 14.33 billion shares were traded across all US equity markets versus the year-to-date daily average of 16 billion. VIX rose 285bps to 16.59, crude oil rose 175bps to 78.64, 10-year T-bond yield fell 4bps to 4.61, gold rose 66bps to 2714, dollar index (DXY) fell 10bps to 108.98 and bitcoin rose 54bps to 100220.
Another frustrating and complicated day (think Semicap, UBER, SMID Software all up), as investors recalibrate to interest rate volatility returning to the market (10-year yields looked ‘destined’ for ~5% on Monday, now closer to ~4.5%), while the “Mag7” weighed on the market. The S&P equal weight ended up +80bps. AAPL fell 4% (its worst day since August) due to a combination of sector data (China/Canalys) and TSM comments on smartphone seasonality in Q1, though neither data point seemed particularly ‘new’ or surprising. The stock broke the 100-day moving average and is now 12.33% off the highs (200-day moving average is at 216.71).
On the other hand, financial results remain solid, but today's lot did not reach the high bar set yesterday, except for MS (think: PNC, MTB, FHN, SNV… BAC is very saturated in long positions). Tomorrow, keep an eye on US industrial production and results before the opening (CFG, FAST, HBAN, RF, SLB, STT, TFC).
Our overall activity for the day was a 6 out of 10. The floor ended with just over $1 billion in net demand. Both hedge fund (HF) and traditional investor (LO) activity increased today, with HFs selling macro products (short ratios remain prominent, ~70% in the ETF space). HFs bought financials and technology sectors, while LOs were net sellers of communication services and consumer discretionary, but buyers of macro products.
Derivatives: Volatility eased slightly on the day, though we continue to see buyers of VIX call options and call spreads following yesterday’s S&P rally. There was also interest from China in KWEB and FXI, as well as sellers of equity-linked ASHR call options to take short volatility positions on the expectation that speculation on China will subside in the coming months. For tomorrow, we estimate $4.3B of notional options exposure will expire, marking the largest January expiry on record. We expect this to further clean up the market and keep dealer gamma positions to a minimum, as dealers were long ~1.5B of S&P gamma at the start of the day. The straddle for Friday afternoon is at 0.65%. (h/t Braden Burke)