As the US Federal Reserve’s FOMC meeting approaches, markets are experiencing heightened volatility. The Russell 1000 Index fell by 78 basis points, the NASDAQ Composite dropped by 54 basis points, and the S&P 500 declined by 44 basis points. Both 10-year yields (4.99%) and oil prices (up 330 basis points) are major headwinds for equities.

In the mid-morning hours, crude oil prices surged higher while equities sold off. Saudi Arabia informed some European oil refiners that their September-loading cargoes were cancelled due to the East-West pipeline closure. This news added to the overall bearish sentiment in the market.

Despite the negative trend, there are some bright spots in the market. The software and semiconductor sectors have seen a snapback after yesterday’s big sell-off, with GSXUINFR (+110 basis points) and AMD (+1%) leading the charge. Optical networks also saw a rebound, gaining 40 basis points versus yesterday’s 9.9% decline.

Meanwhile, at our Consumer conference, companies are largely expressing concern about the impact of rising rates and oil prices on their businesses. Those who are levered to low-income consumers are saying that the low-income is stretched, but some are benefitting from trade down. (TY Feiler)

In terms of volumes and liquidity, overall market volumes are down 4% versus the 20-day moving average, while ETFs account for 28% of total volume. Top-of-book liquidity is currently sitting at $4.5 million, which is down 47% versus the 5-day moving average and 33% versus the 20-day moving average.

Our flows indicate that liquidity is poor currently, with LOs (long only) skewed better sellers, and HFs (hedge funds) skewed better to buy, with demand in information technology and staples versus supply in financials and utilities.