Insights 
VT 
The S&P 500 achieved a new high at 6,170, surpassing the February peak. The index increased by over half a percentage point.
Despite a higher-than-expected core Personal Consumption Expenditures Price Index for May, the market’s upward trend continued. The annualised inflation data rose to 2.7%, slightly above April’s revised figure.
Powell’s Remarks on Inflation
Jerome Powell mentioned the potential inflationary impact of tariffs during his Congressional testimony. The likelihood of a 25 basis points cut in September only slightly decreased from 74% to 72% following the inflation data.
NASDAQ reached a new peak at 20,273, and the Dow Jones Industrial Average rose by 0.7%. However, the Dow remains a few percentage points shy of its record high. Nike shares jumped 14% due to better-than-expected earnings, despite anticipated cost increases from tariffs.
Support for the S&P 500 is seen at the 50-day and 200-day Simple Moving Averages around 5,800. Analysts suggest the index could climb to 6,500 later in the year, while UBS set a year-end target of 6,200.
With the US finalising a trade agreement with China and promising additional deals, trade concerns appear less impactful on the market.
The recent move in the equity markets, particularly the S&P 500 climbing to 6,170, signals ongoing strength despite a firmer inflation read. This new high, coming after the break of the February resistance, shows that the market remains comfortable pricing in a stable macro backdrop—even if core inflation for May nudged higher than originally projected.
Market’s Reaction to Inflation Data
The 2.7% annualised figure for core PCE, ticking up from April’s revised number, brought only minor adjustments to rate expectations. The odds of a September cut dropped merely two percentage points, from 74% to 72%. That kind of reaction indicates investors still lean towards monetary easing by year-end. Powell’s remarks on tariffs adding upward pressure to prices didn’t change that conviction drastically, and for now, that line of commentary hasn’t altered projected rate paths in a material way.
Indices like the NASDAQ, now at 20,273, have continued leading on the back of robust tech performance. The Dow’s rise of 0.7% puts it closer to its prior top, but still short of reclaiming that level. Equity options traders may want to note that the rotation into industrial and retail names—evidenced by the sharp move higher in Nike—could imply growing resilience in the consumption side, even in the face of potential cost challenges.
We’ve observed a consistent pattern where the S&P finds footing at its long-term moving averages—namely, the 50-day and 200-day, sitting around 5,800. These zones offer a useful reference for structuring delta-neutral or long-volatility strategies. A breach below would imply a different risk profile, of course, but for now these areas hold well. The upper bound for the index, possibly stretching towards 6,500 if momentum conditions stay favourable, makes the 6,200 level, set by UBS as a closing target, seem modest but within reach.
The reduced concern regarding trade, following a formalised agreement with China and suggestions of further bilateral deals, means geopolitical headline sensitivity may decrease. This has direct implications for skew pricing and gamma positioning. Complacency premiums seem to be creeping in; forward volatility levels have not reacted aggressively to geopolitical updates, so upside calls may now offer relatively inexpensive convexity.
We’re also seeing implied volatility remain compressed around key expiries—clearly showing that the market is not pricing sharp dislocations in the near term, despite inflation data that might have triggered a wider bid for protection in earlier cycles. This suggests the prevailing belief is that softer monetary policy remains more probable than not, despite the data beats.
In this environment, watching the options flow—particularly in weekly puts and short-dated calls—could help recalibrate risk posture. Additionally, call skew is worth keeping an eye on as markets continue to climb in relatively low-volatility conditions.
