Stock prices once again challenged record highs in early trading before retreating, while U.S. Treasuries also experienced a bearish trend, with short-term yields rising slightly due to a sharp increase in import prices (+0.7% mom vs. 0.1% expected).

There is less important data before next Wednesday, when Nvidia's earnings report will be released. The stock price fluctuation implied by the options is +/-8%, slightly lower than its two-year average of +/-8.4% and February's +10.9%. Given the chip giant's outsized weighting in the SPX, an 8% implied move would mean a roughly 0.4% impact on the SPX, not to mention sentiment spillovers to other related stocks in the index.

In addition to higher-than-expected import prices, an expected rebound in oil prices during the busy summer driving season could keep CPI pressures in place until August, though inflation traders remain confident that CPI will fall back below 2.5% by the end of the year.

Unwavering confidence in inflation and a lack of economic risk have allowed markets to focus purely on interest rate trends, resulting in a perfect negative correlation between U.S. Treasury yields and stock prices since mid-December. In other words, stock and bond prices have risen in tandem in a perfectly ideal boom, (again) ignoring tail risks that could come from a further economic slowdown, stubborn inflation, or a valuation correction.

There hasn’t been much noteworthy news on the cryptocurrency front, with BTC holding steady at recent highs and trading activity subdued. However, Coinbase shares fell 9% yesterday, diverging significantly from BTC prices, as investors began to worry that the entry of institutions such as CME into the spot trading business will lead to increased competition in the compliance field. The addition of TradFi will undoubtedly bring the capital inflow that the industry needs, but it will also definitely trigger new competition. What will the cryptocurrency market look like in a year or two? We'll see.

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