The market has seen a broad-based rally to start the month, driven by de-escalatory headlines in the Middle East. With over 400 names in the SPX green on the day, the momentum is recovering after a brutal yesterday that saw a -8% decline (-2.6 sigma move). Today’s reversion is being led by high-beta stocks, which have bounced back by +225bps, after a -15% three-day drawdown, which ranks as the second-worst stretch since Covid. Additionally, we are seeing recovery in some of the most recently beat-up pockets of the market, such as the Mag7, which is having its best day since November, and GSCBMSAL, which is squeezing +370bps.

TMT Trading Dynamics notes that while lowered net exposures, high grosses, and high ETF trading/hedging activity may be supportive of a tactical bounce, they are not enough to support a durable bottom. ETFs remain high at 40%, after another heavy day of ETF shorting activity, with yesterday’s data showing US net sold (-1.3 SDs one-year) driven by short selling and long selling in a 4.3 to 1 ratio. Net selling was driven by net selling in both Macro Products (-1.4 SDs one-year, short sells>long sells).

As we approach month end, there is an estimated $34bn to buy from pensions, alongside elevated month/quarter end volumes (GSET: the percentage of daily volume traded in the last 10 minutes increases from 25.9% to 33.9%). Rates and macro remain in focus, with the market repricing FY cuts, currently pricing in 0.23 cuts for FY26. This is a shift from Friday’s pricing of 0.80 hikes. Market volumes and liquidity are improving slightly into month end, with market volumes +11% vs the 5dma and Top of book still attractive.