It was a down day for most stocks, even if the S&P 500 finished higher by around 25 bps going into the CPI report and the FOMC meeting today. Apple (NASDAQ:AAPL) was primarily responsible for the day’s gain, rising by more than 7% on the day and basically carrying the entire day for the index.
The Dow was actually down on the day by around 30 bps, the Russell 2000 was down 36 bps, and the S&P 500 Equal Weight ETF (NYSE:RSP) was down 41 bps. So, it was a much different day when moving away from the market cap-heavy S&P 500.
Implied volatility did rise sharply, though, with the VIX 1-day climbing to greater than 17, which is no surprise, as we have seen this repeatedly.
Even the VIX rose on the day, to almost 13.
The 1-month implied correlation index rose yesterday.
HY credit spreads widen.
The dollar was slightly stronger too.
Today’s CPI report and the FOMC meeting will offer an implied volatility crush, with the CPI report likely delivering a more brief reaction as IV is rebuilt heading to the 2 PM ET FOMC statement release.
The real crush will happen after the FOMC press conference starts at 2:35 to 2:40 when Powell finishes the prepared remarks. That is when we should drop the IV sharply, and if there is a rally in the equity market, it is likely to occur at that point. How much and far will depend on how high the IV will be when the press conference begins.