This Week

Last week brought a Fed rate cut, an equity rally led by small caps, and somewhat counter-intuitively, a “sell the news” bounce in Treasury yields, from the 2YY to the 30YY. This week’s calendar features GDP, PCE, Fed speak, Micron and Costco earnings. We’re heading in with very low short-dated vol expectations, but with a major expiration now behind us, the path is much easier for the market to make a more decisive move. Futures opened Sunday just slightly in the red. More on the week to come, but first, some weekend headlines:

• Fed's Powell, Miran set to speak with stocks at record highs: What to watch this week (Yahoo Finance)

  • In the week ahead, a raft of Fedspeak will highlight the calendar, with speeches from newly installed Federal Reserve board governor Stephen Miran and Fed Chair Jay Powell on Monday and Tuesday, respectively, the biggest events for close Fed-watchers. A key economic highlight will be Friday's update on inflation, with the Personal Consumption Expenditures index set to show that "core" PCE inflation, the Fed's preferred measure, eased to 0.2% in August while annual increases remained at 2.9%, above the central bank's target.

• The Hottest Thing in the Stock Market Is Suddenly Boring Tech (Bloomberg)

  • After years of soaring on hopes for a high-tech artificial-intelligence future, the stock market’s latest hot corner is an old fashioned part of the technology industry. Seagate Technology Holdings Plc (STX), which makes hard disk drives for computers, is the best performing stock in the S&P 500 Index this year after soaring 156%. Rival Western Digital Corp. (WDC) ranks third with a 137% gain. And Micron Technology Inc. (MU), the biggest maker of memory chips in the US, is fifth following a record 12-session winning streak pushed its 2025 rise to 93%.

• U.S. Investors Are Flush With Cash, and Happy to Keep It There (WSJ)

  • Assets in money-market funds reached a record $7.7 trillion last week, with more than $60 billion flowing into those funds during the first four days of the month, according to Crane Data, an industry researcher. The latest rush into money funds began in 2022, when the Federal Reserve started raising rates.

• Schumer presses Trump to negotiate with Democrats as government shutdown deadline nears (CNBC)

  • Schumer’s push comes after the Senate last week rejected both Republican and Democratic proposals to keep the government funded at least temporarily, raising the likelihood of a shutdown.

• Popular Hedge Fund Options Strategy Attracts Contrarian Bets (Bloomberg)

  • The US equity market has been deceptively calm since the start of August, with 60-day realized volatility the lowest since before the pandemic. The go-to measure of market gyrations, the Cboe Volatility Index, has been stuck below its long-term average of 20 since mid-June. But beneath the surface, individual stock prices are churning violently. That dynamic has drawn hedge funds to ramp up bets on calm in the broader equity market and wider swings in individual shares. As long as the S&P 500 Index grinds higher in a tight daily range and stocks move in various directions, the bet pays off, but margins are narrowing.
    

The SPX is only pricing a 1.1% move for the week—one of the smallest expected ranges in some time. Friday’s expiration and the post-FOMC collapse in short-dated vol may have exaggerated that, but with the VIX ticking higher overall, near-term option pricing looks a bit underpriced. We’ll likely see IVs firm up early to midweek ahead of key economic data, though the market already seems to have a decent handle on PCE based on CPI and PPI trends.

This Week’s Expected Moves:

• SPX/SPY: 1.1% (6575-6750)

  • QQQ: 1.4%

  • IWM: 2.4%

  • TLT: 1.2%

  • USO: 2.4%

It’s not just SPX/SPY short-dated expected moves running low—TLT and USO vol expectations are also fairly tight this week. Oil seems comfortable in the low-to-mid $60s, while TLT and other long-duration Treasuries made a somewhat counterintuitive move after the FOMC, suggesting most of the adjustment was already priced in ahead of the cut. IWM still carries the highest vol expectations, though they’ve narrowed compared to last week. With IWM back at multi-year highs, a breakout above this level could spark speculative animal spirits across the broader market.

As far as economic data this week, the headlines will be around GDP on Thursday and PCE on Friday:

Economic Calendar: (consensus)

• Monday

  • All day - Fed speak: Williams, Barkin, Musalem, Hammack, Miran

• Tuesday

  • 9:45am - S&P Manufacturing, Services PMI

  • 12:35pm - Powell Speech

• Wednesday

  • 10am - New Home Sales (0.65m)

• Thursday

  • 8:30am -GDP (3.3)

  • 8:30am - Initial Jobless Claims (240k)

• Friday

  • 8:30am - PCE (core 0.2%)

  • 10am - UoM Consumer Sentiment

As far as earnings, another light week with Micron and Costco this week’s highlights:

Earnings (with expected moves):

• Tuesday

  • Pre-market: AZO 4%

  • After-hours: MU 9.5%

• Wednesday

  • After-hours: KBH 4.5%

• Thursday

  • Pre-market: ACN 7%, KMX 6%

  • After-hours: COST 3.5%

One final point: short-duration vol remains low through the first week of October and the next jobs report. A breakout—particularly in small caps—or even a minor pullback could expose some near-term complacency and inject more day-to-day swings, especially coming out of a large expiration from Friday. On the upside, watch for the potential of vol rising alongside stocks, a classic sign of surging retail speculation that can create sharp and unpredictable moves.

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