Equities experienced sharp swings this past week as markets oscillated between risk-on and risk-off sentiment following Nvidia’s earnings release. Despite delivering exceptional Q3 results and even st...
Equities experienced sharp swings this past week as markets oscillated between risk-on and risk-off sentiment following Nvidia’s earnings release. Despite delivering exceptional Q3 results and even stronger Q4 guidance, early enthusiasm quickly gave way to renewed concerns over elevated valuations and the potential for an AI-driven bubble.
Thursday’s release of the delayed September jobs report added another layer of complexity. The data showed +119k jobs added, yet unemployment ticked up to 4.4%, giving hawkish voices temporary leverage in the debate over a December rate cut.
Beyond equity volatility and long-awaited economic data, Fed commentary dominated the narrative. Just a month ago, markets were pricing in a near-certain December cut (at 99%). By Thursday’s close, expectations had plunged to 35%, as officials leaned neutral-to-hawkish, citing persistent inflation and limited data visibility. However, late in the week, NY Fed President John Williams struck a dovish tone, stating that he sees “room for a further adjustment in the near term” to bring policy closer to neutral. That single remark sent rate-cut odds surging to 68%, an outsized reaction for one voice - but rate cut projections took notice.
Treasury yields mirrored the uncertainty, oscillating within a tight range. The 10-year briefly dipped below its 50-day SMA to 4.03% before closing at 4.06%, marking the 16th consecutive session within the 4.03% to 4.16% band. This consolidation contrasts with equities, which saw declines exceeding 5% at one point. Given the divided stance among policymakers and investors, I continue to believe Treasury yields will struggle to sustain levels below 4% for any meaningful duration despite the intact downward trend of rates throughout the year.
From the Municipal Desk (with contributions from Ryan Riffe):
Municipals remained largely unfazed by the volatility experienced in both equity and Treasury markets. Although the MMD curve held relatively steady for the second consecutive week, signs of weakness may have begun to emerge in the market for the first time in quite a while. The new issue calendar topped more than $15 billion as issuers raced to price deals ahead of the shortened holiday week. Syndicate balances were noticeably larger, particularly in deals concentrated in the 2–12-year part of the curve. Looking ahead, supply is expected to drop to just under $2 billion during the upcoming 3.5-day trading week. We believe dealer inventories have grown heavier throughout the month, which could put pressure on the market if supply reverts to its weekly average of over $10 billion. In such a scenario, choppy trading conditions are likely to persist into year-end, creating potential buying opportunities as desks look to reduce risk and unwind aged positions.
30-Day Visible Supply @ $7.5 Billion
Weekly Calendar expected @ $1.5 Billion
2-YR Ratio @ 69%
3-YR Ratio @ 69%
5-YR Ratio @ 66%
10-YR Ratio @ 67%
30-YR Ratio @ 88%
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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