Market Rises Amid Political Turmoil as Traders Bet on Calm
The S&P 500 climbed 0.41% to 6,465.94 despite political upheaval following President Trump's dismissal of Fed Governor Lisa Cook. The Nasdaq Composite gained 0.44%, while the Dow Jones added 135.60 points. Cook's firing, justified by allegations of mortgage fraud, stirred bond markets more than equities, with long-term Treasury yields jumping and short-term yields dropping.
Traders interpreted the yield curve steepening as a signal of potential short-term rate cuts but heightened long-term inflation risks. The U.S. dollar slipped 0.2%, reflecting shifting expectations. Meanwhile, volatility vanished from markets, with hedge funds aggressively shorting the VIX. Net short positions in VIX futures hit 92,786 contracts—the highest since September 2022.
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