In a widely anticipated move, the Federal Reserve cut the Fed Funds target rate range by 25 basis points to 2%-2.25% at its meeting on July 31. We previewed this decision and its likely impact on intraday volatility in a recent post. Here, we unpack market reaction to the fifth FOMC meeting of the year and compare it to the four prior meetings in 2019.
As in our previous blog post, we found that TRF market share dropped at the time of Fed announcements and then remained lower into the close.
Some aspects of this rate decision were similar to the previous four, such as the pattern of TRF share and the QV increase at 2 p.m.
Yet this decision stood out for the market reaction seen during the press conference. The press conference appeared to be the catalyst for a significantly higher QV and trading volumes, as traders tried to decode Powell’s language on the future path of interest rates. At the time of writing, markets are predicting another 25 bps cut at the September meeting, with some probability of the Fed leaving rates unchanged.
Following the record-setting 40.1 million average daily volume (ADV) in the 1st quarter of this year, Q2 2021 options volume was the 2nd highest of all-time with 37.6 million contracts traded per day. Robust volume was driven in part by market anticipation of a potential earlier rise in interest rates and Fed tapering, as well as increased volume in options on new issues and continued activity in retail-focused stocks.
After-hours trading has been a larger piece of the total trading volume since the onset of the pandemic, with retail presence growing stronger and earnings announcements becoming less of a factor. In this post, we examine the impact of these shifting dynamics on after-hours price discovery and order behavior.
The surge in market volatility and trading volumes since the onset of the pandemic in March 2020 has impacted numerous aspects of equity market trading. One less-studied area has been after-hours trading. After-hours has also seen changes in order flow trends and influences, and here we examine trends and shifts occurring in these sessions.