The market saw another quiet session today as traders eagerly await the upcoming Consumer Price Index (CPI) report and the kick-off of the earnings season. Federal Reserve Chair Jerome Powell reiterated his recent remarks from Sintra, emphasizing that the disinflation process is underway and acknowledging rising employment headwinds.

Market Activity and Volume

Overall trading volumes were down by 11% compared to the 20-day moving average. This decline in activity can be attributed to several factors:

1. Lack of Micro News Flow: There hasn’t been much significant news affecting individual stocks.
2. Low Index Volatility: The VIX is hovering near multi-year lows, indicating minimal market volatility.
3. Pre-Earnings Preparation: Investors are positioning themselves ahead of the earnings season.

Despite the quiet session, our trading desk tracked slightly better to buy, with a +39 basis points increase, driven primarily by Hedge Funds (HF) and Long-Only funds (LO). However, the overall volume feels relatively light, down by 115 points against the 20-day moving average. Notably, the top-of-book activity has been robust for the second consecutive day, tracking +46% compared to the trailing 20 days.

Sector Insights

Both Long-Only funds and Hedge Funds were active on the buyside in the Technology and Consumer Discretionary sectors. On the other hand, Hedge Funds showed a preference for selling in the Financials and Industrials sectors.

There is significant focus on the Software sector today. Client activity remains relatively quiet across this space, and the dispersion of performance is low. This pattern possibly suggests that there is top-down pressure on the sector rather than aggressive selling of individual stocks.

Looking Ahead

As the market anticipates key economic indicators and corporate earnings reports, we expect trading volumes and activity to pick up. Investors will be closely watching the CPI report for insights into inflation trends, which could influence Federal Reserve policy decisions. Additionally, the earnings season will provide critical information on corporate performance and economic resilience, potentially setting the tone for market movements in the coming weeks.