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SPX Goes 5 for 5. Are You Not Entertained?
RiskReversal Recap: Friday May, 16th
RiskReversal Media & RiskReversal Media
May 16, 2025
MARKET WRAP
Another up day from equities that ended a five out of five for the SPX, and +5% or so on the week. SPX is now just 3.5% off the all time highs. This morning saw one of the lowest consumer sentiment readings of all time but investor are now dimsissing that sort of data as already dated and reflective of the throes of the tariff war. On the day, SPX +0.7%, QQQ +0.4% and IWM +0.9%. Treasuries were quiet with the 10Y yield 4.44%. Gold was lower and oil higher. DXY closed the week just above $101, and the VIX is now near 17.
After hours: Quiet in the after hours with the SPY down a tick. This is an expiry day with a lot of expiring positions so the backdrop changes a bit into Monday. (more on that below).
MRKT MATRIX: TODAY’S TOP STORIES
S&P 500 rises as benchmark heads for big weekly gain (CNBC)
Signs of a homebuilding slump (Axios)
Trump Says US to Set Tariff Rates for Other Nations in Weeks (Bloomberg)
Trump Tax Bill Fails in House Panel as GOP Splits on Cost (Bloomberg)
Nvidia plans Shanghai research centre in new commitment to China (Financial Times)
US crypto group Coinbase targeted by hackers (Financial Times)
Meta Battles an ‘Epidemic of Scams’ as Criminals Flood Instagram and Facebook (WSJ)
Anthropic closes $2.5 billion credit facility as Wall Street continues plunging money into AI boom (CNBC)
ByteDance Aims to Match Meta Sales in 2025 as TikTok Gains Steam (Bloomberg)
Charter Agrees to Combine With Cox in $34.5 Billion Cable Deal (Bloomberg)
WHAT’S NEXT?
It was a strong week for U.S. equities, with the S&P 500 rallying +5% and the Nasdaq climbing +6%, and a telling five-for-five green streak for the S&P. The rally was largely a continuation of the optimism sparked by a cooling in U.S.-China trade tensions.
In addition to macro relief, the market saw sector-specific recalibrations, from semiconductors to aircraft manufacturers. These adjustments supported rotation into some of the hardest-hit areas from March/April and “risk on” can be seen in other asset classes as well.
Despite the bullish price action, concerns about the economy haven't disappeared. This week’s economic data was mixed, featuring extremely low consumer sentiment readings once again today that underscored continued anxiety among households. However, inflation data came in softer than feared, helping to dial back stagflation concerns.
Perhaps most notable was the collapse in market volatility expectations. After more than six weeks of near record high-volatility, the options and volatility backdrop has flipped, with near-term implied moves shrinking and even small dips being bought. Positive gamma now dominates near current price levels, creating a self-reinforcing stability in the tape.
That said, today’s options expiration may soften some of that support heading into next week. As open interest rolls off, the volatility cushion provided by dealer hedging could fade a little. But broadly speaking, investor sentiment has turned completely. It would likely take an extended string of down days to materially reverse the newfound low risk backdrop—and even then, many traders believe they'd have time to react, rather than front-running another wave of selling. Those that have tried to front run a turn lower from here have been covering, adding to the underlying bid. Keep an eye on the action early in the week to see signs of whether today’s expiry was helping to drag stocks higher into Friday’s close as it’s unlikely that the intraday buy the dip doesn’t exhaust itself soon. A pullback from here unrelated to a major story would likely only test SPX 5785 or so. To the upside 6000 will likely act as resistance for now.
We’ll be back this weekend with a look at the upcoming week’s catalysts, check your inbox on Sunday!
