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The NASDAQ reached record levels this week, rising slightly by 0.05% during trading.
The NASDAQ index ended the day on a positive note, with a slight increase of 0.05%, marking a new record. It has set record highs every day this week and hit this milestone 11 times this year. The NASDAQ rose by 11.39 points, closing at 20,895.66.
The S&P index fell slightly by -0.01% after reaching a new record level the day before, marking its ninth record in 2025. The Dow industrial average declined by -0.32%, losing 142.30 points and finishing at 44,342.19.
Next week’s trading will include important economic releases from the Fed, ECB, and several countries.
Next week, the Federal Reserve will start a quiet period before the FOMC rate meeting on July 30th. The European Central Bank is expected to keep interest rates steady, considering ongoing tariff issues, although rates are close to neutral.
Upcoming Economic Data Releases
The S&P Global flash manufacturing and services data for both Europe and the US will come out on Thursday. Last week, US initial jobless claims dropped to 221,000, moving back toward lower levels after a temporary rise toward 250,000. Key releases include New Zealand’s CPI on Sunday, expected to be 0.6%, down from 0.9%. On the same day, Japan will hold Upper House Elections. On Wednesday, eyes will be on the AUD as the RBA Governor delivers a speech. Thursday brings important data like the flash manufacturing and services PMIs for France, Germany, and the UK. The ECB will announce its interest rate decision, likely keeping it at 2.15%. In the US, unemployment claims are expected to rise to 229,000. On Friday, UK retail sales data is predicted to climb by 1.2% after a decline of 2.7%.Federal Reserve Quiet Period and Market Implications
During the Federal Reserve’s quiet period, we believe market movements will rely heavily on incoming data, shaping expectations for the July 30th meeting. The recent drop in jobless claims to 221,000 suggests a strong labor market, potentially reducing the likelihood of a significant rate cut by the central bank. We expect the European Central Bank to maintain current rates, but their statement is likely to have a dovish tone. Recent reports, such as the ZEW Economic Sentiment survey for Germany falling to 49.6 in July, indicate waning confidence amid global trade tensions. Weak forecasts for flash manufacturing PMI in Germany and France further support the idea of future easing. The contrast between a robust US economy and a slowing European one will be a key theme in the coming weeks. The latest US Consumer Price Index showed inflation easing to 3.0% year-over-year in June, which alleviates some pressure, yet the US economy continues to outshine others. This leads us to favor US assets over European ones. Thursday will be critical with a flurry of manufacturing and services data before the ECB press conference. A significant gap between the expected US PMI figures (above 52) and the expected contraction in Europe could drive the dollar’s strength. Derivative traders might explore call options on the dollar index or put options on the EUR/USD pair. Historically, instances of policy divergence—like in 2014 when the ECB eased while the Fed tightened—have resulted in sustained dollar rallies. We’ll be closely watching Christine Lagarde’s press conference for any hints that align with this past behavior. Any strong indications of future rate cuts in Europe could spark a similar trend. In addition to the major economies, we’ll pay attention to the inflation report from New Zealand and watch for policy hints from Governor Bullock in Australia. The election outcome in Japan could also lead to short-term volatility in yen-denominated assets. These events could present trading opportunities alongside a core long-dollar strategy. Create your live VT Markets account and start trading now.California governor plans to simplify oil drilling permits to ensure energy stability
Governor Gavin Newsom of California faces pressure to stabilize energy supplies and has proposed easing oil drilling permits. Despite his goal to end oil drilling by 2045, state regulators suggest allowing limited new well permits as a temporary solution.
The Trump administration kickstarted a significant review to boost oil and gas leasing on federal lands in California. This move aims to expand fossil fuel development, with the U.S. Bureau of Land Management assessing over 684,000 acres of surface land and 959,000 acres of subsurface minerals across 17 counties.
Oil Drilling In Kern County
This includes heavily drilled Kern County and parts of the Bay Area, potentially leading to hundreds of new wells. Additionally, the federal government has canceled a 2012 agreement with California that allowed for joint permitting oversight on federal land, aiming to streamline federal approvals. This decision points towards less regulation and could increase oil drilling activities in California, despite concerns from state-level environmental advocates. We believe Newsom’s proposal to ease permitting, even with long-term environmental goals in mind, shows a short-term bearish outlook for regional crude prices. This political shift, driven by efforts to stabilize energy supplies while gas prices have recently averaged over $5.15 per gallon according to AAA, opens opportunities for traders. Any rise in local supply—even if small globally—will impact the West Coast market. California’s crude oil production has steadily declined over decades, dropping to about 313,000 barrels per day in early 2024. The federal review of over 950,000 acres of subsurface minerals might temporarily reverse this trend. We see this potential increase in supply as a key factor that could widen the price gap between local crude grades like Kern River and the WTI benchmark.Volatility In Crude Oil Market
The conflicting signals from state policies, federal actions, and market pressures create considerable regulatory uncertainty, driving volatility in the market. This situation may lead to rising option premiums in the upcoming weeks. We view this as a chance to buy volatility using strategies like long straddles on crude oil futures, expecting sharp price movements in either direction. With this in mind, we are considering strategies that would benefit from a weaker regional market rather than a significant drop in global prices. This might include futures spreads that short West Coast-linked crude contracts while taking long positions in WTI or Brent. The news alone is likely to create trading opportunities, even before any new barrels are produced. Moreover, the ongoing transformation of refineries, such as the Phillips 66 facility in Rodeo, from crude oil processing to renewable fuel production is important. This shift reduces local demand, meaning any new supply from increased drilling could exceed the existing refining capacity. This dynamic suggests downward pressure on local crude prices. Historically, regional supply gluts have resulted in deep and prolonged price discounts, similar to the situation in the Permian Basin before pipeline capacity improved a decade ago. Although the scale may differ, the basic principle remains consistent. We expect similar localized pricing pressure to arise if drilling permits are expedited. Create your live VT Markets account and start trading now.Goolsbee stresses the importance of understanding tariffs to evaluate their impact on inflation and the timing of rate cuts
The Federal Reserve’s Goolsbee suggests that new tariffs on parts and copper, along with revisiting tariffs on Europe and Canada, may not be helpful. It is important to understand how these tariffs will affect inflation for future economic planning.
Goolsbee points out that ongoing tariff announcements make it hard to gauge their impact on prices, which disrupts inflation tracking. This uncertainty could push back the timeline for lowering interest rates if inflation stays at 22%.
Monitoring Inflation Trends
Keeping an eye on inflation trends is crucial, and we may need to look at several months of data. If the tariff uncertainties clear up, there’s a chance that interest rates could go down. The ongoing uncertainty around tariffs clouds our ability to forecast inflation trends. This confusion could delay any potential interest rate cuts from the Federal Reserve. Derivative traders should brace for increased volatility as markets respond to each news update. The new tariffs on Chinese goods—including a 100% tax on electric vehicles and additional hikes on steel and solar parts—are examples of the confusing announcements mentioned earlier. This approach makes it harder to set prices and will likely cause sector-specific issues. We see investment opportunities in options on industrial and commodity ETFs that will feel the impact of these trade policies. Even though the latest Consumer Price Index report for April showed a slight drop to 3.4%, this single statistic isn’t enough to build confidence. We agree that several more months of good data are needed before the central bank will feel secure. This likely means the market will stay in a “wait and see” phase throughout the summer.Market Pricing and Volatility
This delay is now evident in market pricing. The CME FedWatch tool shows there’s about a 50% chance of a rate cut in September, a significant change from early-year predictions. As a result, trading strategies based on a clear interest rate trend are challenging to devise at this moment. With the CBOE Volatility Index (VIX) hovering around a low 12-15 range, we believe volatility is undervalued given current conditions. Historical data from the 2018 tariff escalations showed similar uncertainty leading to rocky markets. We see this as a good opportunity to buy longer-dated options at low premiums for a potential larger market movement. Create your live VT Markets account and start trading now.Trump enacts the GENIUS Act to regulate U.S. stablecoins with clear compliance and issuance rules
The GENIUS Act is a new federal law that regulates U.S. dollar-backed stablecoins. It establishes clear guidelines for how these coins can be issued, what they must be backed by, and the compliance standards they need to meet.
Stablecoins are special types of cryptocurrencies designed to keep their value steady. They often peg their value to a reserve asset, like the U.S. dollar, euro, or gold. People use stablecoins for various purposes, such as making digital payments, trading cryptocurrencies, borrowing, and participating in decentralized finance (DeFi).
Key Features of Stablecoins
Stablecoins have several important features. They aim for price stability, where one stablecoin is meant to equal one U.S. dollar. They are backed by reserves, which could be cash, commodities, or other cryptocurrencies. They help facilitate quick, low-cost international transactions, support cross-border money transfers, and provide a stable value in fluctuating economies. Under the GENIUS Act, only federally approved banks, licensed nonbanks, and state-regulated entities can issue stablecoins. Each stablecoin must be backed one-to-one by liquid reserve assets, and issuers must publicly disclose their reserves monthly. In case of bankruptcy, stablecoin holders will have priority to claim those reserve assets. Issuers must comply with the Bank Secrecy Act, including rules against money laundering. Both federal and state regulators will oversee compliance, and the law restricts foreign issuers to safeguard U.S. interests. The goal is to uphold the dominance of the U.S. dollar and ensure national financial security. This law brings clarity to the $260 billion stablecoin market, allowing traditional banks to issue compliant stablecoins while ensuring consumer protections. It helps position the U.S. as a leader in regulating digital assets. We expect this law will significantly lower risk for U.S. dollar-backed stablecoins. The chances of experiencing severe drops in value, like the dramatic de-pegging of TerraUSD in 2022, are likely coming to an end for regulated stablecoins. This should mean less price fluctuation for compliant stablecoins, making long volatility strategies less effective.Anticipated Market Shift
We expect a significant change in the underlying assets for crypto derivatives as the market adapts to these new rules. Right now, Tether’s USDT is the leader with a market cap over $110 billion, but its transparency regarding reserves has been questioned. As regulated issuers become more prominent, we might see a shift towards higher-quality alternatives like Circle’s USDC, potentially changing the most popular trading pairs for futures and perpetual swaps. With clearer regulations, traditional financial institutions are likely to enter this space and create regulated derivative products. Picture futures contracts based on a basket of compliant stablecoins or options available on well-known exchanges like the CME. This will open new opportunities for hedging and speculation beyond current decentralized platforms. This legislation provides the needed clarity to encourage more institutional investment in the $162 billion stablecoin market. We expect a rise in overall trading volume and liquidity as a result. For derivative traders, this means tighter bid-ask spreads and deeper order books, lowering transaction costs for major trading pairs. We can look at history for guidance, such as the 2014 money market fund reforms. After these changes, hundreds of billions quickly shifted from prime funds to government funds. A similar swift capital reallocation might happen within the stablecoin ecosystem, and traders should prepare for this potential transition. Create your live VT Markets account and start trading now.Next week, earnings reports will be released from companies like Verizon, Tesla, and Intel.
Next week, several companies will report their earnings, kicking off an exciting earnings season. Tesla and Alphabet are set to make announcements, while the big players like Amazon, Apple, and Meta will report the following week.
On Monday, Verizon and Domino’s Pizza will share their earnings before the market opens. NXP Semiconductors will report later that day. Tuesday will feature early reports from Lockheed Martin, Coca-Cola, Philip Morris, General Motors, D.R. Horton, and Northrop Grumman. Texas Instruments, SAP, Intuitive Surgical, and Capital One will report later in the day.
Wednesday brings reports from AT&T, GE Vernova, Freeport-McMoRan, and General Dynamics in the morning. In the afternoon, we’ll hear from Tesla, Alphabet, ServiceNow, IBM, and Chipotle. Thursday starts with announcements from American Airlines, Nokia, Dow, Southwest, and Honeywell, with Intel expected later on.
The week wraps up on Friday, with Centene sharing their earnings before the market opens. This variety of reports spans different sectors, including technology, automotive, health care, and consumer goods.
We expect next week’s earnings to shake up a market that has been fairly calm. The VIX, which measures market fear, has recently traded below 13, far less than its historical average. This suggests that options premiums are not reflecting the potential for surprises. Traders should prepare for a spike in implied volatility (IV) for individual stocks as earnings reports approach.
We’ll be closely watching the technology earnings from Tesla and Alphabet on Wednesday, as they will shape the rest of the tech earnings season. After Tesla’s Q2 delivery miss of 444,000 vehicles, the options market is predicting a stock move of more than 8% in either direction. We’ll pay special attention to guidance on profit margins. For Alphabet, we’re looking for insights on cloud growth and costs tied to AI integration, as these will impact sentiment across the sector.
NXP, Texas Instruments, and Intel will provide important data for the semiconductor industry, which is a key part of the global economy. Although the Semiconductor Industry Association reported a 15.8% year-over-year increase in global sales for May 2024, we remain cautious about the automotive and industrial sectors, which are showing signs of weakness. We think using straddles could be a good way to trade the potential for large price movements in these stocks, regardless of direction.
Reports from traditional companies like General Motors, Coca-Cola, and Verizon will give us a different perspective on the market. Following a disappointing 0.1% increase in June’s retail sales, we’ll scrutinize these reports for indications of declining consumer demand. Any downward guidance from these companies could suggest broader economic issues.
For derivatives traders, a key strategy will be managing the usual post-earnings “IV crush.” High-beta stocks like Chipotle tend to have their implied volatility spike, with the market currently predicting a nearly 7% move for its earnings report. We believe that selling premium through strategies like iron condors could be profitable if the actual stock movement is less dramatic than anticipated.
Lastly, reports from American Airlines and Southwest will provide a clear view of consumer health. Recent TSA data shows strong travel demand, with checkpoints often clearing over 2.8 million passengers daily. However, we’re concerned about how rising fuel costs might affect profitability. Buying protective puts could be a smart hedge if strong revenue numbers are overshadowed by rising expenses.
Oil rig count drops by two to 422, while gas rigs rise by nine to 117
The Baker Hughes weekly rig count reports a drop of two oil rigs, bringing the total to 422. Meanwhile, gas rigs increased by nine, totaling 117.
In total, the rig count rose by seven, reaching 544 rigs.
Oil Rig Decline
The slight dip in oil rigs suggests that producers remain cautious and disciplined with their capital. This small reduction in future supply supports a positive outlook for crude prices. It seems that U.S. shale producers are not aggressively pursuing new drilling even as prices rise. This decrease in drilling is occurring while the oil rig count is close to its lowest level since early 2022. Recent data from the U.S. Energy Information Administration shows a reduction of 2.5 million barrels in crude inventory, along with OPEC+ maintaining its production cuts. Traders might want to consider strategies to benefit from rising oil prices, such as buying call options on WTI futures. In contrast, the significant increase in natural gas rigs indicates that producers are seizing opportunities from recent price gains driven by forecasts of a summer heatwave. This boost in future supply could lead to lower prices in the medium-term, especially for contracts later in the year. This is the largest weekly rise in gas rigs in over a year.Natural Gas Rigs Surge
This increase in drilling comes as natural gas in underground storage is more than 20% above the five-year average, according to the latest government data. The mix of rising drilling activity and already high inventories may limit prices after the short-term demand decreases. Traders could consider buying put options on Henry Hub futures for the winter to prepare for a possible price drop. The clear difference between oil and gas drilling activity offers a relative value opportunity. Historically, such disparities suggest a strategic shift by energy companies based on their views of the commodity market. We believe the market might be underestimating the potential for continued tightness in the oil sector compared to the well-supplied natural gas market. Create your live VT Markets account and start trading now.US stocks fell after Trump’s call for tariffs on EU goods, negatively affecting market indices
US stocks fell after news about possible new tariffs. The Dow Jones dropped by 0.55%, the S&P 500 by 0.18%, and the Russell 2000 by 0.64%. In contrast, the NASDAQ index rose by 0.16%.
For the trading week, the Dow decreased by 0.30%, while the S&P gained 0.43%. The NASDAQ rose by 1.30%, and the Russell 2000 increased by 0.19%. Despite recent declines, the S&P and NASDAQ achieved record highs.
US Debt Market
In the US debt market, yields have declined today. The two-year yield is at 3.862%, down by 5.44 basis points. The five-year yield is at 3.946%, down by 5.9 basis points. The 10-year yield sits at 4.419%, dropping 4.3 basis points, while the 30-year yield is at 4.990%, down by 2.3 basis points. Over the trading week, most yields decreased. The two-year yield fell by 3.0 basis points, and the five-year yield decreased by 3.2 basis points. The 10-year yield remained unchanged, while the 30-year yield went up by 3.5 basis points. The Fed funds interest rate expects cuts of less than 50 basis points by the end of the year. We think the report about possible tariffs from the former president indicates increased market uncertainty, which plays a big role in derivative strategies. The CBOE Volatility Index (VIX), known as the market’s “fear gauge,” recently surged over 7% due to trade-related news, suggesting we should prepare for greater price fluctuations. Historically, trade disputes in 2018-2019 caused ongoing volatility, and we expect a similar situation could arise again. Given the market’s initial negative response, investing in protective put options on broad market indices like the SPDR S&P 500 ETF (SPY) appears valuable. This strategy provides a direct hedge against potential downturns caused by rising trade tensions. The significant drop in the Russell 2000 indicates that even smaller, domestically focused companies are not safe from these concerns.Sector Vulnerability
The mention of a 25% tariff on automobiles makes that sector especially vulnerable, prompting us to consider bearish positions. We could buy put options on automakers with strong European supply chains or on an ETF like the First Trust Nasdaq Transportation ETF (FTXR). According to the European Automobile Manufacturers’ Association, the EU exported over 1.2 million cars to the U.S. in 2023, highlighting the potential impact of this policy. On the other hand, the strength of the tech-heavy NASDAQ suggests it might be relatively insulated from direct European trade conflicts. We could create pairs trades, like buying call options on the Invesco QQQ Trust while simultaneously buying puts on the industrials-focused SPDR ETF (XLI). This approach isolates the potential outperformance of tech compared to sectors more affected by the tariffs. We see the sharp decline in bond yields, particularly on the two-year note, as a move towards safety and a sign that the Federal Reserve may need to respond to a slowing economy. If trade tensions rise, the market is likely to price in more significant rate cuts than the expected cuts of less than 50 basis points. Therefore, we consider long positions in Treasury futures or call options on bond ETFs like the iShares 20+ Year Treasury Bond ETF (TLT) to be a sound strategy in light of this possibility. Create your live VT Markets account and start trading now.Trump supports a 15-20% tariff on EU goods and opposes car duty reductions while advocating for reciprocity.
President Trump is suggesting a minimum tariff of 15-20% on all goods from the European Union (EU). This is a change from the previously discussed 30% tariff mentioned in “the letter.”
Trump is not planning to lower the 25% tariff on EU cars and is even considering higher reciprocal tariffs above 10%, regardless of any potential agreements. The EU trade commissioner reported pessimism about recent talks in Washington to EU ambassadors.
Trump opposes 0% tariffs and wants a tax on EU access to the U.S., ranging from 10% to 20%. There will be no tariffs on U.S. exports, with national security being offered as the reason for these measures.
EU companies will not face tariffs on goods produced and sold in the U.S. In financial markets, the EUR/USD exchange rate has fallen, testing the 100-hour moving average.
The drop in the currency pair follows a failed rally between 1.1663 and 1.1691, seen at the 200-hour moving average. If it falls below the 100-hour moving average, it could reach another low at 1.1614 and 1.1563-1.1578, which would be a 38.2% retracement to 1.15372 from the May low.
Given the President’s clear intentions, we believe this is more than just a short-term negotiating tactic; it signals a real policy change. The push for a minimum 15-20% tariff, even after a possible deal, indicates a long period of trade tension. Traders should prepare for ongoing uncertainty and a weaker European economic outlook.
The immediate response in the EUR/USD exchange rate is crucial. We should view any rises towards the 200-hour moving average as chances to put on short positions. A drop below the 100-hour moving average would confirm this downward trend. We will initially target the swing low at 1.1614, using put options or direct futures shorts on the Euro.
This situation is serious, as U.S.-EU trade in goods and services topped $1.3 trillion in 2022. A widespread tariff would greatly affect this trade flow, which supports a bearish view on the Euro. The negative assessment from the Commissioner in Washington suggests that a diplomatic solution is not close.
Beyond currency, we see a clear opportunity in equity derivatives, especially by buying put options on European indices, like Germany’s DAX. The administration’s refusal to lower the 25% tariff on cars puts German automakers in a vulnerable position. This sector is essential to the German economy and a major exporter to the U.S.
Historically, companies like BMW and Mercedes-Benz rely on the U.S. for a significant share of their sales, often between 15% and 20% of their global total. The national security justification gives the White House the power to impose these tariffs quickly, making put options on these specific auto stocks a strong strategy.
We also expect increased market volatility. During the 2018-2019 U.S.-China trade dispute, the VIX index, which measures expected volatility, shot up over 40% several times after tariff announcements. Therefore, we should consider buying call options on volatility indices to benefit from the expected market swings.
Our strategy will be to build positions as technical evidence backs up our fundamental view. We will add to our EUR/USD shorts upon a confirmed break of the 100-hour moving average. Our focus remains on the downside targets, including the 38.2% retracement level near 1.1537.
European indices finished the week with mixed results, showing different trends in major markets.
European indices had mixed results at the end of the week. Germany’s DAX dropped by 0.35%, while France’s CAC barely budged with a slight increase of 0.01%. The UK’s FTSE 100 saw a small rise of 0.22%, Spain’s Ibex fell by 0.04%, and Italy’s FTSE MIB rose by 0.46%.
During the week, Germany’s DAX edged up by 0.14%, whereas France’s CAC slipped by 0.08%. The UK’s FTSE 100 increased by 0.57%, Spain’s Ibex decreased by 0.14%, and Italy’s FTSE MIB saw an increase of 0.58%.
