Why Are the VIX and S&P 500 Possibly Diverging?

What’s in Today’s Report:

• Why Are the VIX and S&P 500 Possibly Diverging?
• Is Selling Becoming Mechanical?
• CPI Takeaways (It Won’t Make the Fed More Hawkish)

Futures are moderately lower mostly on momentum from Wednesday’s afternoon selloff.

Economically, UK economic data disappointed (GDP and Industrial Production both missed estimates) while BOE officials warned of more rate hikes reminding markets there’s a real stagflation threat in the UK.

Geo-politically, Finland formally applied to join NATO (and Sweden is expected to follow), keeping NATO/Russia tensions high for the foreseeable future (meaning quarters and years).

Today, we get Jobless Claims (E: 190K) and PPI (0.5% m/m, 10.7% y/y) and one Fed speaker, Daly (4:00 p.m. ET), but barring a big spike in claims, a big move in PPI or incrementally hawkish commentary from Daly (all of which are unlikely) these events won’t move markets.  So, short-term technical will continue to be the main driver of stocks, and markets need to show some stabilization, otherwise, the declines themselves will invite more selling.