MARKET WRAP

It was a relatively quiet day in the markets, with equities starting in the red but the SPX (+0.03%) grinding back to unchanged. The Nasdaq 100 was down -0.3%, and the Russell 2000 -0.5%. The session had a cautious tone as investors awaited tomorrow’s CPI report (more on that below) and heard from the first two days of Powell testimony on Capitol Hill. The 10-year yield edged up again, now sitting at 4.54%. Oil continued its recent upward momentum, gaining another 1.2% today and rising 4% over the past week. Gold/GLD (-0.26%) took a breather but remains near all-time highs. The VIX finished the day at 16.

On today’s MRKT Call SPX and yields ahead of CPI, Tesla, and more. Meanwhile, on the RiskReversal Pod, Dan is joined by CNBC’s TechCheck host Deirdre Bosa to discuss AI, mega cap tech, and the impact of DeepSeek. Enjoy!

MRKT MATRIX: February 11, 2025

Today’s Top Stories:

• S&P 500 is little changed as Powell urges caution on rate cuts, trade tensions escalate (CNBC)

• Fed Chair Powell says central bank doesn’t ‘need to be in a hurry’ to lower interest rates further (CNBC)

• The Magnificent 7 Are So Last Year. Cash Cows Are the New Kings. (WSJ)

• Vance Warns U.S. Allies to Keep AI Regulation Light (WSJ)

• OpenAI’s Altman Says Musk ‘Probably Just Trying to Slow Us Down’ (Bloomberg)

• Why This Week’s Inflation Report Is Especially Important (WSJ)

• CPI for January 2025 is Projected to Rise 2.9% Year-Over-Year (FactSet)

• GM expects to mitigate up to 50% of potential North American tariffs, which Ford describes as ‘chaos’ (CNBC)

• EU Pledges Countermeasure Against Trump’s Tariffs on Metals (Bloomberg)

Today’s MRKT Call is Presented by Robinhood

Tesla Approaches Key Trading Levels

Dan and Guy begin with a look at SPX and the 10 yr yield into tomorrow’s CPI and Powell testimony on Capitol Hill. A look at a potential trade in TLT to position for a continued move away from its recent upside resistance, or simply a quick move lower on tomorrow’s CPI. Next, a look at the move in Intel and some of the recent action in INTC options. Then, Tesla’s move lower and recent negative headlines, and how important Chinese EV production is becoming to the TSLA story. And TSLA is the Chart of the Day sitting right near its 100 day moving average, what is the possibility it sees the 200 day below? Then a look at some meme stock action in stocks like CVNA into a look at BTC and the 78k level if the recent consolidation turns bearish. Finally a look at LYFT into earnings.

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Today’s RiskReversal Podcast is Presented by Current and RBC

Deep Thoughts on DeepSeek with Dee Bosa

Dan Nathan is joined by Deirdre Bosa, host of CNBC's TechCheck. They discuss the hype surrounding mega-cap tech earnings and the evolving AI landscape. Key topics include the impact of AI on tech giants like Nvidia, Microsoft, Google, and Amazon, particularly their capital expenditures and return on investment. They delve into the implications of DeepSeek's innovations, open source models, and the competitive AI field. The conversation also touches on the dynamics of the Microsoft-OpenAI relationship, the potential of AGI, and the market reactions to tech earnings. Additionally, they explore the future of ride-hailing companies like Uber and Lyft amid the rise of autonomous vehicles.

What’s Next?

Tomorrow’s CPI report is on deck, with Wall Street consensus expecting a 0.32% month-over-month and 2.9% year-over-year increase for the headline number, and 0.3% / 3.2% for core. As noted yesterday, traders are anticipating slightly elevated volatility compared to a typical session, but nowhere near the levels seen back when CPI surprises were more frequent.

Here’s a look at how traders are pricing potential moves across major indices and ETFs, along with the implied trading ranges:

• SPX  0.7% 6025-6105

• SPY 0.7% 6001-609

• QQQ 0.9% 523-533

• IWM 1.2% 223-229

• TLT 0.7% 87.75-89.25

• GLD 0.8% 265-270

Previously, when inflation uncertainty was higher, the options market sometimes priced in an expected SPX move closer to 1.5%. But with inflation estimates now more predictable, traders have shifted their focus to FOMC decisions and Jobs Numbers as potential volatility drivers.

That said, greater confidence in estimates can mean a bigger reaction to even a minor surprise. Keep that 0.7% SPX move in mind—on the upside, that’s just shy of the prior highs around 6125, and reaching those highs would be closer to a +1% move. On the downside, the 6000 level serves as support—until it doesn’t. A small CPI surprise that managed to put some doubt into equities (and sent yields higher) would likely want to test that level (that’s more like -1.1%).

The most probable scenario, as always, is a non-event, where the market moves within that 0.7% range, PPI follows suit, implied volatility drifts lower into the three-day weekend, and recent volatility starts to settle. The past few trading sessions are already hinting at that pattern taking hold and if CPI and PPI aren’t a surprise we could see a further deceleration of volatility.

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