The financial markets experienced a relatively flat trading session, with a hint of risk-off sentiment prevailing. Despite the lack of significant movement, indicators such as the 1-month implied correlation index and the VIX suggested a cautious approach among investors. Traditionally, when the VIX and implied correlation index rise, the S&P 500 tends to decline, but the market defied this trend.

Looking ahead, the upcoming CPI report and the FOMC meeting are expected to drive volatility levels higher. The VIX 1Day closed at a low level yesterday, but with crucial events on the horizon, a significant uptick in volatility is anticipated. Typically, the VIX rises to around 17 to 19 before the CPI report, and today is unlikely to deviate from this pattern.

Furthermore, today’s focus will be on the 10-year Treasury auction following a subpar 3-year Treasury auction. The 10-year yield has surged to 4.47% over the past two trading sessions, adding an element of uncertainty given the proximity of the auction to the CPI release and the FOMC meeting. Global rates saw an increase recently, and the US markets are adjusting rate cut expectations following a strong US jobs report.

Additionally, the spike in crude oil prices, which rose by almost 4% in a single day, has contributed to the upward pressure on rates. The energy market dynamics, coupled with the broader economic indicators, are creating a complex landscape for investors and traders to navigate in the current market environment.