The market closed yesterday with notable activity across major indices. The S&P rose by 61bps, closing at 6086 with a MOC (Market on Close) of $2.7 billion to sell. The NDX surged by 133bps to 21853, while the R2K dipped by 61bps to 2303. Meanwhile, the Dow added 30bps, closing at 44156. Trading volumes were robust, with 13.78 billion shares exchanging hands across all U.S. equity exchanges, surpassing the year-to-date daily average of 16 billion shares. The VIX gained 27bps to 15.10, crude fell by 59bps to 75.38, and gold added 38bps to close at 2755. Bitcoin faced a sharp drop of 228bps, finishing at 103777.

Tech Leads the Way

The SPX and NDX were propelled higher by strength in the TMT (Technology, Media, and Telecom) sector. This rally was underpinned by broadly better earnings reports and growing optimism around large-scale investments in artificial intelligence. The S&P Equal Weight index lagged its cap-weighted counterpart, rising ~1% with 328 names trading lower on the session.

Among standout movers:

• Oracle (ORCL) rose 7% on additional details about its new partnership with Softbank and OpenAI. The collaboration, dubbed “Strargate,” involves key technology partners such as ARM (+15%), NVIDIA (+4%), and Microsoft (+4%).
• Seagate (STX) jumped 7%, benefiting from continued margin expansion and robust demand in the industrial tech sector.
• PG added 2%, fueled by higher-than-expected organic sales growth and strong quarterly performance.
• GE Vernova (GEV) climbed 2% on strong earnings, bolstered by order strength and a growing electrification backlog of over $20 billion.

Other notable movers included Travelers (TRV), which rose 3% on favorable underwriting trends and better-than-expected reserve development.

Trading Desk Perspective

From the desk, yesterday’s activity level was rated a 6 on a scale of 1 to 10. Overall executed flow finished strong, with +650bps vs the 30-day average. Long-only investors (LOs) drove net buying of $2 billion, particularly in tech, discretionary, and communication services. Hedge funds ended the day balanced, showing demand in tech and staples while supply dominated in communication services and discretionary.

Thematic Trends: AI and Renewables

A key theme driving flows has been the surge in interest around artificial intelligence and renewable energy. Clients are actively upsizing positions in thematic baskets, even as we approach the inauguration—a period that historically sees reduced trading activity. This time, however, the opposite is occurring, with strong inflows across consensus themes like:

• AI Semiconductors (GSCBSMHX)
• AI Platforms (GSTMTAIP)
• AI Software (GSTMTAIS)
• Election-Sensitive Renewables (GSCBDMRN)

These thematic plays are gaining significant traction, signaling a shift in sentiment as investors focus on areas of structural growth.

On Derivatives

SPX floating strike volatility remained unchanged yesterday, though fixed strike volatility rose considerably. This is consistent with the desk’s view, as the market continues to break all-time highs. Long volatility, particularly in the front-end and topside, is becoming more attractive.

The street is shifting back into a longer gamma zone, reflected in the declining cost of SPX straddles. Notably, the “tomorrow straddle” is already priced at 50bps. Given the market’s recent performance—moving more than 50bps close-to-close in 4 of the last 5 sessions and rallying 240 handles over the last 5 trading days—this pricing dynamic suggests further opportunity for volatility plays.

As markets navigate all-time highs, investor focus remains on structural growth areas like AI and renewables, alongside active positioning in derivatives markets. With strong earnings and favorable macro conditions driving optimism, yesterday’s trading underscores the market’s resilience and adaptability to shifting narratives.