MARKET WRAP

More tariff headlines, this time some potential light at the end of the tunnel allowed stocks to hold a rally off those recent lows. We’ll likely have more headline risk the rest of the week, as well as the jobs number on Friday to see if the bounce is sustainable near term. For the day, SPX +1.1%, the QQQs +1.3% and IWM +1%. It’s been volatile beyond equities too. The 10yr yield was higher today, now 4.29%, Oil was -2.6%, and DXY -1.4%. The dollar is down nearly $4 since Monday morning. 

• On today’s MRKT Call: intraday volatility, recession fears, and what an end of the trade war could look like for equities.

• On RiskReversal Pod: Dan is joined by Ann Bordetsky to discuss the emerging importance of vertical AI applications in various industries such as healthcare, construction, and defense. Enjoy!

• Some thoughts on 0DTE effects at the bottom of this email.

MRKT MATRIX: March 5, 2025

Today’s Top Stories:

• Dow rallies 500 points as market rebound picks up steam (CNBC)

• Trump pauses auto tariffs after discussions with CEOs, Canada’s Trudeau (CNBC)

• Trump Hails Tariffs as US Economy Barrels Into Trade Wars (Bloomberg)

• Trump Calls for Getting Rid of Chips Act Funding (WSJ)

• Robert Rubin Blames Trump for Most Uncertainty in 60-Year Career (Bloomberg)

• JPMorgan traders turn tactically bearish, say economic growth expectations may ‘crater’ (CNBC)

• The Two-Headed Monster Stalking the Economy Has a Name: Stagflation (WSJ)

• How Elon Musk Muscled His Way Into the FAA (Bloomberg)

• Novo Nordisk to Sell Weight-loss Drug Wegovy Direct to Patients (Bloomberg)

Today’s MRKT Call is Presented by SoFi

What To Buy If Tariff Wars Reverse

The show kicks off with a discussion on the recent market volatility, which isn’t just affecting a few risk assets but appears to be spreading across the board. Today’s biggest moves came in the dollar/DXY.

• SPX & Technical Support: A check-in on the SPX chart, where the 200-day moving average resulted in support and a bounce.

• Volatility Spike: Liz highlights that daily price swings have widened in recent weeks, with intraday ranges reaching their highest levels since 2022.

• Sector/Stock Recovery: A look at which sectors and stocks could rebound if the market sees hope for resolution in the trade war.

  • Chart of the Day: GM as a potential contrarian play.

• Economic Indicators:

  • Liz breaks down the Atlanta Fed’s GDPNow model, which came in alarmingly low plus A look at market returns during times of policy uncertainty.

• Bond Market Action:

  • Guy analyzes the latest moves in bonds via TLT and the US 10-year yield.

• Inflation & Economic Data:

  • Liz compares CPI vs. ISM Prices Paid for inflation insights and then highlights the ADP report & small-cap hiring trends, leading into a quick look at the IWM chart.

• Earnings & Tariffs:

  • A look at John Butters’ FactSet report on earnings season, revealing that half of reporting companies have mentioned tariffs as a concern.

• Wrapping up: The team takes some guesses on where the S&P 500 will be when Liz returns from maternity leave!

Click here to access all of the charts mentioned in today’s MRKT Call.

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Today’s RiskReversal Podcast is Presented by Betterment and iConnections

Tariff Turmoil & Tomorrow's Tech Titans with Ann Bordetsky

Dan Nathan and Ann Bordetsky discuss the latest trends in generative AI investments and the emerging importance of vertical AI applications in various industries such as healthcare, construction, and defense. They delve into the potential for AI to transform labor into AI-native software, pointing out that the market has shifted towards building industry-specific AI solutions. Anne highlights the key factors for successful AI startups and discusses how developments in public markets and big tech investments influence her early-stage investment strategies. They also cover the competitive landscape among big tech companies like Meta, Amazon, and Apple in the AI assistant market, and the evolving consumer habits in search engines and platforms. The conversation concludes with interesting takes on the value of AI domains and potential disruptions in both the private and public AI markets.

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What’s Next?

Implied vols compressed a bit today but remain elevated. Here are the updated expected moves into Friday’s close:

• SPX/SPY: 1.5%

• QQQ: 1.9%

• IWM: 2.2%

Tomorrow morning before the open we get Challenger Job Cuts and initial jobless claims, as well as the ECB rate decision. During the trading day there are several Fed Gov speeches. Friday morning is the NFP Jobs Number. Implied vols are pretty consistent for the next few days (around 30 in SPX options) as the market attempts to price the possibility of tariff headlines at anytime. Next week vols drop to the low 20’s and stay there pretty consistently over the next month (very similar to the VIX). 

Intraday volatility has been particularly notable in the last half-hour of trading, with intraday ranges reaching their highest levels in three years, as Liz pointed out on today’s MRKT Call. This heightened volatility stems from headline-driven chaos, elevated implied volatility, and the short gamma environment we’re currently in. These factors combine to create an accelerant for intraday swings, where traders are forced to chase the market through thin liquidity to manage risk. Another key element, as Guy has frequently noted, is the increasing influence of 0DTE (zero days to expiration) options, which have had a direct impact on late-day market moves.

Large Option Positions In Thin Liquidity

While we’ve previously discussed the longer-term effects of large option positioning, such as how heavy call-selling near 6150 made it difficult for the market to break above that level, 0DTE options function differently. Their impact is purely intraday, often having little effect but occasionally distorting end of day price action in significant ways. For instance, yesterday’s sharp sell-off into the close may have been driven in part by a large Iron Condor trade. This trader typically sells a condor at or near the expected daily move, aiming to collect premium if the SPX stays within the short strikes. It doesn’t happen every day, but when it does, it’s in size. Yesterday, the short put strike was 5780, and in the final minutes of trading, the SPX dropped sharply and closed right near that level.

Today, the same trader’s short call strike was 5840, with a trade size of 15,000 contracts—a volume that far exceeded open interest at any other strike. In thin liquidity conditions, such concentrated positioning can act as a magnet for price action, as market makers on the other side hedge above and below that strike, often pushing through thin liquidity right to or near that strike. The action over the last 2 hours of today’s trading implies that a pin near the large trade is exactly what happened as the market rallied to the strike following the trade, then had difficulty separating from the strike for the final two hours.

It’s a fun and interesting dynamic to keep an eye on during this volatile period. If you’re watching intraday action, you can scan the SPX options chain for today’s volume and open interest or you may see the prints on market chats and social media, where traders often flag these in real-time.


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