The market saw a significant reversal today, driven by strong earnings reports from financial stocks and a decrease in trade tensions. The S&P 500 index reached new highs for the year, with ETFs leading the charge and nearing record highs. However, liquidity levels have plummeted to their worst levels since August, indicating a decrease in investor confidence.

Our desk is currently experiencing low activity levels, with our franchise performing well due to LO selling. The popularity of certain sectors, such as consumer discretionary and communication services, has increased demand, while supply in macro products, real estate, and industrials has led to a decrease in supply. Similarly, HFs are more interested in buying, particularly in the technology, finance, and consumer staples sectors.

The recent focus on US-China trade and credit concerns (the “cockroach theory”) continues to be a major driver of market sentiment. Additionally, the ongoing government shutdown and hawkish FOMC comments from Waller have contributed to the current market dynamics. Meanwhile, some analysts believe that the recent sell-off in AI stocks, such as ORCL and TSM, may be due to a “sell the news” action, as investors are taking profits after recent positive news.

Overall, while the market is experiencing high levels of volatility, the current trends suggest that medium-term action could prove supportive for many stocks, particularly those with longer-term projects and revisions (2027+). As always, it’s important to stay informed and adapt to changing market conditions.