Cboe Global Markets

The Week that Was: April 19 - April 23

Kevin Davitt
April 26, 2021

A concise weekly overview of the U.S. equities and derivatives markets

Last week (April 19 to April 23), the Healthcare sector led the pack, increasing 2%, as Energy lagged, decreasing 1.55%. U.S. equities traded in a narrow range and across the board ended the week in-line with last Friday. News of a potential change to the capital gains tax rate for high earners caused some short-lived volatility in the second half of Thursday’s trading session. Earnings season continued with Netflix, United Airlines and Southwest Airlines reporting last week. Netflix subscriber growth underwhelmed but both airlines have seen a jump in travel demand. Meanwhile, initial unemployment claims data fell to the lowest levels since March 2020 and median home sale prices reached new all-time highs.

Quick Bites

Indices

  • U.S. Equity Indices were relatively rangebound, with the exception of the Russell 2000 Index. Friday’s market rally pushed U.S. markets higher, ending the week mostly unchanged.
  • S&P 500 Index (SPX): traded in 1.8% high-to-low range and settled near the high end of the range. The SPX fell 5 handles, or a fraction of a percent, on the week.
  • Nasdaq 100 Index (NDX): Fell 0.7% last week and closed slightly below 14,000.
  • Russell 2000 Index (RUT℠): Traded in a wider range last week. The small cap index traded in a 4.8% high-to-low range and settled fractionally higher on the week. 
  • Cboe Volatility Index (VIX™ Index): Measured as high as 19.90 on Thursday, following news that President Biden will propose to raise the capital gains tax rate. The weekly low was 16.78 and the index closed at 17.35, up 1.25 on the week.

Options

  • SPX options average daily volume (ADV) was about 1.15 million contracts, in line with the previous week. The one-week at-the-money SPX options straddle (4180 strike with a 4/30 expiration) settled at 53.0 (11.5% implied volatility) which implies a +/- range of 1.27%.
  • VIX options ADV was about 470,000 contracts last week, down from the previous week’s ADV of approximately 570,000 contracts. Tuesday was the most active session with 813,000 VIX options contracts on the tape.
  • RUT options volume increased week-over-week to an ADV of 48,500 contracts, compared to an ADV of about 33,800 contracts the previous week.

Across the Pond

  • The Euro STOXX 50 Index was fractionally higher last week.
  • The MSCI EAFE Index (MXEA™) fell slightly and the MSCI Emerging Markets Index (MXEF™) was slightly higher week-over-week.  

Charting It Out

Observations on VIX futures term structure and the correlation between the VIX Index and S&P 500 Index

  • The April VIX futures went off the board at 19.28, the lowest monthly VIX futures settlement since February 2020 when the futures settled at 14.51.
  • The futures curve moved slightly higher on the week. The May VIX futures contract was up 0.45 and June advanced 0.65. The May/June spread settled at 1.80 wide, compared to 1.60 the week prior.
  • There is no meaningful risk being priced into the weekly VIX futures ahead of the April 28 Federal Open Market Committee (FOMC) meeting. The FOMC will most likely decide to leave rates unchanged, but Federal Reserve Chairman Jerome Powell’s language will be dissected for potential inflationary concerns and the tapering of asset purchases.

VIX Futures Term Structure

Source: LiveVol Pro

In 2021, the VIX Index has trended lower with each subsequent S&P 500 Index all-time high. The previous confluence of highs and a VIX Index above 25 was unprecedented. The Index option and volatility markets continue to move back toward a new normal. 

Correlation Between the S&P 500 Index and VIX Index

Source: Goldman Sachs Research

Macro Movers

  • The U.S. 10-year treasury yield moved between 1.62% and 1.53% last week and ended the week at 1.57%, unchanged week-over-week. On a near-term basis, the range appears to be 1.75% - 1.50% ahead of the FOMC meeting this week.
  • The price of lumber is up 36% in April and 450% since April 2020. In the last year the cost increased from about $250 per board foot to approximately $1,375 per board foot.
  • According to headlines last week, the cost of building an average single-family home is up $24,000 year-over-year because of lumber alone. A portion of the issue stems from a beetle infestation in British Columbia, Canada that’s eaten into supply.
  • The big players in technology were mixed on the week. Google continues its advance and traded to new all-time highs, surpassing $2,300 on Friday. Amazon, Facebook and Tesla were all slightly lower last week. Microsoft was effectively unchanged.

Major Cryptos

  • Bitcoin (BTC) prices trended lower last week, trading around $51,000 by the end of the week.
  • Ethereum (ETH) traded between approximately $2,560 and $2,100 during the week.
  • Dogecoin (DOGE) lost about 38% of its value during the week. On Friday, April 16, the coin traded as high as $0.3725. This past Friday, April 23, it settled around $0.232. 
  • Coinbase (COIN) went public last week with an $85 billion valuation. In its last round of private funding (2018) the company was valued at $8 billion. COIN revenues have increased nearly 1,000% year-over-year.

Coronavirus

  • Over the past week there were about 61,000 new COVID-19 cases per day, compared to a seven-day average of 71,000 the week before.
  • The U.S. reinstated the Johnson & Johnson vaccine after pausing inoculations to investigate rare blood clots in some recipients.
  • 41.2% of the U.S. population has had at least one dose of a COVID-19 vaccine and 27.2% are fully vaccinated. On average, 2.7 million doses were administered daily last week.   
  • Globally, India is in the midst of an escalating crisis and cases are increasing substantially in Brazil, as well. Moving averages in both countries are at new highs as a result of massive infection numbers.

COVID-19 Cases in the U.S.

Source: The New York Times

Tidbits from the News

In developed markets, including the S&P 500 Index, growth companies have outperformed value in the month of April. Growth is up 310 basis points as of April 22, reversing the trend from late 2020 into early 2021.

The rate of change in the median price of existing homes is historically high and median prices have doubled since 2011. More than a decade of unusually low interest rates, coupled with a pandemic, has fueled the residential real estate market. Median prices have doubled since 2011.

Median U.S. Home Prices 1999 - 2021

Source: Compound Advisors

The Week Ahead

  • Data to be released this week: Durable Goods on Monday; Case Shiller Home Price Index and Consumer Confidence Index on Tuesday; FOMC meeting and press conference on Wednesday; Weekly Jobless Claims and Quarter One Gross Domestic Product (GDP) on Thursday; Income/Spending, Chicago Purchasing Managers Index (PMI) and Consumer Sentiment Index on Friday.
  • Earnings season continues with a deluge of companies reporting this week.

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