Bonds Rally Through Hot Inflation, and SPX Opens Over the Flip Into Opex

The 10-year fell 10 basis points on the hottest PPI since 2022. It closed at 5.09% from 5.19%, and stocks followed once the morning's chip selling eased. SPX erased a drop to 7,670 and closed at 7,744.06, up 0.3%, with the Dow up 556 points and small caps up 1.4%. Premarket 7,752.

None of that looks like a market bracing for the Fed. Hammack said after Thursday's close that the Fed might need to move even more if an inflationary mindset sets in, and called financial conditions roughly neutral. The long end rallied anyway, because the money leaving chips is going into bonds and the rest of the index. The semiconductor index has fallen six sessions straight, about 12%, while SPX is down under 1% over the same stretch. Treasury lifted its buybacks to $6 billion an operation in September and couldn't get yields down; a week of chip selling did. If the semis find a floor, bonds lose their reason to rally with the October 27-28 meeting under two weeks out.

Today is monthly opex, and every strike in this profile expires at the close. It's back to about 1.5 to one positive, premarket on the 7,750 node and 7 over the flip at 7,745, prior demand at 7,746 on the line. Everything from 7,750 up to the 7,810 call wall is positive and dense, so dealers sell rips and buy dips inside that band, with the call wall the magnet above. Above the wall, 7,815 to 7,850 carries more gamma than the wall itself, so a break keeps grinding through the record close. Underneath, 7,720 to 7,745 is thin chop. The put wall at 7,700 is dense, prior demand at 7,698 on it, with negatives all the way down to 7,600.

The lean is long on a dip into 7,746, the flip with prior demand on it, for 7,763 and then 7,779, with the 7,810 call wall the pull into the expiry. Buying the open on the 7,750 node pays up for the middle of the band. A hold under 7,735 ends it, and under 7,719 the profile is negative all the way to the put wall.