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    Capital Markets | 4 min read

    Market Commentary: Week of January 9, 2023

    Last Week

    Both stocks and bonds rallied hard last week, particularly on Friday when the December NFP report showed that wages cooled for the month. It felt more like a relief rally, especially in rates as the JOLT and ADP employment data posted earlier in the week showed little sign of the labor market weakening.

    Friday’s NFP report showed another month of solid job gains, while Wednesday’s JOLT report showed the closely watched (by the Fed) ratio of job openings to job seekers steady at 1.7 to 1.

    I’m not sure why the dream of the “Fed Pivot” is still dancing in many investors’ heads, especially as Fed speakers took to the airwaves Thursday and Friday to dispel such thoughts. The idea of a soft landing coupled with victory over inflation in 2023 is a pretty long-odds bet in this reporter’s opinion.

    • The S&P 500 rose 1.46% for the week. The average daily move was 1.15%.
    • The NASDAQ advanced 0.98% for the week. The average daily move for the week was 1.37%.
    • The 2-year Treasury yield plunged 18 basis points, closing at 4.25% on Friday. The high year-over-year is 4.72% and the low yield is 0.89%.
    • The 10-year Treasury yield dropped 32 basis points for the week, closing at 3.56% on Friday. The year-over-year high yield is 4.24% and the low yield is 1.706%.
    • The VIX Index declined 3.5% for the week, closing at 21.13 Friday. Year-over-year high 36.45 and low 17.62.
    • The MOVE Index decreased 6.4% for the week, closing at 113.87 on Friday. The year-over-year high is 160.72 and the low is 72.57.
    • 5-year Investment Grade Corporates (as measured by Markit CDX) spreads decline 7 basis points for the week closing at 75 basis points Friday. The high spread year-over-year high is 111 and the low of 51.
    • The high-yield corporate debt (as measured by Markit CDX) tightened 34 basis points, closing at 450 basis points on Friday. The year-over-year high is 627 and the low is 300.
    • US Dollar Index ended the week up 0.34%, closing at 103.522 on Friday. The year-over-year high is 114.11 and the low is 94.79.
    • WTI Crude fell 8.1% using the February 2023 WTI Futures contract, closing at $73.77 Friday. The year-over-year high is $123.70, and the low is $71.02.
    • Gold, as measured by the February futures contract, rose 2.4% for the week closing at $1,867 on Friday. The high price for the front contract year-over-year is $2,043 and the low is $1,623.
    • Bitcoin dropped rose 2.1% closing at 16,928 on Friday. The high price year-over-year is $47,967 and the low is $15,632.

    The Week Ahead

    We come in this morning with Treasury yields up modestly after last week’s sharp rally, while equity futures are up about 0.25%. The big event this week will be the release of the BLS December CPI report on Thursday (8:30 am for us normal folks and 8:29 am for those who stole November’s report!). Market expectations call for a modest decline in both the headline number as well as the core. This will be the last CPI report before the FOMC's next meeting from January 31st to February 1st.

    The front end of the yield curve will continue to be extremely volatile. Last week, we saw the 2-year spike 11 basis points in yield on Thursday and then plunge 21 basis points on Friday. We could see similar insanity this week as well.

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    Definitions:

    An index is unmanaged and not available for direct investment. Definitions sourced from Bloomberg.

    The Bloomberg Global Aggregate Negative Yielding Debt Market Value Index represents the portion of the Bloomberg Global Aggregate Index that measures the aggregate value of global debt with a negative yield.• The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.• The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.• The Cboe Volatility Index® (VIX) is a calculation designed to produce a measure of constant, 30-day expected volatility of the US stock market, derived from real-time, mid-quote prices of weekly S&P 500® Index (SPX) call and put options with a range of 23 to 37 days to expiration.• The ICE BofA MOVE Index is a yield curve weighted index of the normalized implied volatility on 1-month Treasury options. It is the weighted average of implied volatilities on the CT2 (Current 2 Year Government Note), CT5 (Current 5 Year Government Note), CT10 (Current 10 Year Government Note), and CT30 (Current 30 Year Government Note), with weights 0.2/0.2/0.4/0.2 respectively.• The Markit CDX North America Investment Grade Index is composed of 125 equally weighted credit default swaps on investment grade entities, distributed among 6 sub-indices: High Volatility, Consumer, Energy, Financial, Industrial, and Technology, Media & Tele-communications. Markit CDX indices roll every 6 months in March & September.• The Markit CDX North America High Yield Index is composed of 100 non-investment grade entities, distributed among 2 sub-indices: B, BB. All entities are domiciled in North America. Markit CDX indices roll every 6 months in March & September.• The U.S. Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. Intercontinental Exchange (ICE) US computes this by using the rates supplied by some 500 banks.

    Investing involves certain risks, including possible loss of principal. You should understand and carefully consider a strategy’s objectives, risks, fees, expenses and other information before investing. The views expressed in this commentary are subject to change and are not intended to be a recommendation or investment advice. Such views do not take into account the individual financial circumstances or objectives of any investor that receives them. All indices are unmanaged and are not available for direct investment. Indices do not incur costs including the payment of transaction costs, fees and other expenses. This information should not be considered a solicitation or an offer to provide any service in any jurisdiction where it would be unlawful to do so under the laws of that jurisdiction. Past performance is no guarantee of future results.

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    John Tuohy

    John Tuohy is CEO of SWBC Investment Services, LLC, a Broker/Dealer and SWBC Investment Company, an SEC Registered Investment Advisor (RIA). In his role, John is responsible for identifying, developing, and executing the division's strategic plan and all business development, sales, and marketing activities.

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