Capital Markets | 5 min read

    Market Commentary: Week of July 18, 2022

    Last Week

    We were shocked, yet again, by a blockbuster CPI reading as the June report blew the doors off economists' estimates. The report was ugly through and through.

    Prior to Wednesday’s shocker, there was a zero percent chance the Fed would go 100 basis points at their July 27 FOMC meeting, as measured by Fed Funds futures and OIS swaps. By the end of Wednesday, futures and OIS had about a 60% probability. The front end of the yield curve quickly repriced, and the curve flattened sharply. Initially, stocks and risk assets sold off hard but managed to stabilize as the week went on. Nevertheless, the market psychology was battered some more.

    The Q2 earnings week kicked off with big bank earnings. JPM laid an egg while Citigroup blew the doors off expectations. The outlook for the major Wall Street banks is grim for the rest of the year as the COVID-19 underwriting and advising fee-fest has ended abruptly. The U.S. Dollar continued to surge briefly brining the USD-Euro pair through parity and ruin to commodities.

    • The S&P 500 declined 0.9% for the week. The average daily move was .95%.
    • The NASDQ fell 1.57% for the week. The average daily move for the week was 1.1%.
    • The 2-year Treasury yield rose 2 basis points closing at 3.13% on Friday. High year-over-year 3.43%, low yield .10%.
    • The 10-year Treasury yield dropped 16 basis points for the week, closing at 2.92% on Friday. Year-over-year high yield 3.47%, low yield .91%.
    • The VIX Index was relatively flat for the week, closing at 24.23 Friday. Year-over-year high 36.45 and low 15.01.
    • The MOVE Index dropped 11% for the week, closing at 129.85 on Friday. Year-over-year high 156.16 and low 51.73.
    • 5-year Investment Grade Corporates (as measured by Markit CDX) spreads were flat for the week closing at 90 basis points Friday. High spread Year-over-year high 102 and low of 46.56.
    • High Yield corporate debt (as measured by Markit CDX) widened 13 basis points, closing at 530 basis points on Friday. Year-over-year high 588, and low 269.
    • U.S. Dollar Index continued to surge, up 1% for the week closing at 108.1 on Friday. On Thursday, the index hit a new year-over-year high of 108.54. Year-over-year high 108.54 and low 91.86.
    • WTI Crude continued to decline in the face of dollar strength falling 7% using the September WTI Futures contract, closing at 94.57 Friday. Year-over-year 123.70, and low 47.62.
    • Gold, as measured by the August 2022 futures contract fell 2.2% for the week closing at 1,704 on Friday a new year-over-year low. High price for the front contract year-over-year 2,043 and low 1,704.
    • Bitcoin fell 4%, closing at 20,926 Friday. High price year-over-year 67,734 and low 17,785.

    The Week Ahead

    We come in this morning with equities up smartly across major market sectors and Treasury yields higher. The surging U.S. Dollar is piling yet another inflationary shock to the globe when it needs it least.

    Over the weekend, BlackRock’s Larry Fink commented that food insecurity around the world is a far greater risk than energy inflation to the developing world. I agree and the last I checked much of the global supply chain runs through the developing world, especially Asian emerging markets.

    Suddenly, moving production over to countries like Vietnam does not look like such a hot idea. Hunger drives political insecurity like no other factor. I do not think that enough market participants are pricing this risk in. Perhaps they will now that Larry Fink said it.

    Earnings week kicks into high gear this week. Most economic data this week is second tier, although Existing Home Sales for June on Wednesday should be interesting.



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

    • The Bloomberg Barclays Global Aggregate Negative Yielding Debt Market Value Index represents the portion of the Bloomberg Barclays 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.


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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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