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    Capital Markets | 4 min read

    Market Commentary: Week of November 7, 2022

    Last Week

    Last week, the battered financial markets hoped for some respite from the Fed as their November FOMC meeting concluded last Wednesday. The statement released at 2 p.m. gave hope of a significant pause and potentially even a “pivot” later in 2023.

    However, the Chairman’s press conference dashed all hopes. Chairman Powell reiterated that the Fed’s number one concern was getting inflation under control, and it was still “very concerning.” The Chairman also dropped a bomb by stating that the peak funds rate the Fed is targeting for 2023 has moved higher since the September meeting. With those statements, markets reversed course as Treasury yields surged and stocks cratered.

    The selling continued, pouring it on Thursday, as well. On Friday, we got the October employment numbers, and they were a mixed bag. The unemployment rate rose a bit and job creation came in higher than expected. Bruised equity markets decided to end the week focusing on the “positive” and staged a decent rally.

    • The S&P 500 dropped 3.33% for the week. The average daily move was 1.22%.
    • The NASDAQ plunged 5.64% for the week. The average daily move for the week was 1.66%.
    • The 2-year Treasury yield rose 24 basis points, closing at 4.66% on Friday. A new high year-over-year was set Thursday at 4.72%. High year-over-year 4.72%, low yield .40%.
    • The 10-year Treasury yield rose 14 basis points for the week, closing at 4.16% on Friday. Year-over-year high yield 4.24%, low yield 1.345%.
    • The VIX Index fell 5% for the week, closing at 24.55 Friday. Year-over-year high 36.45 and low 16.29.
    • The MOVE Index declined 11% for the week, closing at 128.44 on Friday. Year-over-year high 160.72 and low 69.1.
    • 5-year Investment Grade Corporates (as measured by Markit CDX) spreads widened 2 basis points for the week closing at 90 basis points Friday. High spread year-over-year high of 111 and low of 49.
    • High Yield corporate debt (as measured by Markit CDX) widened 22 basis points, closing at 523 basis points on Friday. Year-over-year high 627, and low 288.
    • US Dollar Index was nearly flat for the week closing at 110.88 on Friday. Year-over-year high 114.11 and low 93.34.
    • WTI Crude advanced 5.3% using the December WTI Futures contract, closing at 92.61 Friday. Year-over-year high 123.70, and low 65.57.
    • Gold, as measured by the December 2022 futures contract, rose 1.9% for the week closing at 1,676 on Friday. High price for the front contract year-over-year 2,043 and low 1,633
    • Bitcoin rose 2.4% closing at 21.135 on Friday. High price year-over-year 67,734 and low 17,785.

    The Week Ahead

    We come in this morning with stocks up a bit and Treasury yields higher. Over the weekend, Chinese officials stated the zero COVID-19 policy will remain, dashing last week’s market hopes that China was ready to “open up." Puzzling, this change in a huge narrative did not smoke equities overnight. Something to keep an eye on.

    Midterms this week! The call is for a “Red Wave,” which means the possibility of Republicans taking both houses of Congress. Risk markets like that scenario, although it sounds like we may not know all the results Tuesday night or even by the week’s end.

    The other big item this week is October CPI on Thursday. After getting burned with stronger-than-expected numbers the last few months, Street estimates are calling for a hot one this time. Should be exciting!

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    Definitions:

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

    The Bloomberg 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 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 & Telecommunications. 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. 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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