After a bit a non-event yesterday where stocks spent most of the day lower barring a late surge in some technology names, US markets look set to open lower today with another day of low volatility expected.
Futures suggest the S&P 500 will open 3 points lower at 1,947 with the Dow Jones expected to open 21 points lower at 16,924.
eBay (NASDAQ:EBAY) lost out to Facebook (NASDAQ:FB) yesterday as the Paypal CEO switched companies but overall internet tech stocks did well with Apple (NASDAQ:AAPL), Twitter (NYSE:TWTR) and LinkedIn (NYSE:LNKD) all trading higher. The re-emergence of tech stocks as the out-performers highlights the complacency in the market at the moment.
The complacency is one tempered with some caution though. The belief appears to be there will in the near future be a small correction, perhaps of 5% in the S&P 500. So the approach is one of riding out any correction with current holdings and adding to it on the dip rather than at the highs. This less aggressive attitude can been seen by the decrease in margin debt in March and April.
Other than investor beliefs over the state of markets, one of the reasons given for the low volatility is more structural; the increased regulation over trading at banks. Banks have clearly been pulling back from proprietary trading, particularly in commodities and FX where regulatory scrutiny and risks of fines over manipulation has been the highest.
Most trading at banks is typically flow trading, ie facilitating the trading of others so while banks obviously encourage flow from clients, the demand still needs to be there. The slower demand from clients for trading is the bigger cause than any regulatory effect.
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