Market Insights | 5 min read

    Market Commentary: Week of October 16, 2023

    Last Week

    Both equity and rates markets were hit by tremendous bouts of volatility last week as the Israel-Gaza conflict unfolded. The rates market’s initial reaction was a strong flight to quality/short covering bid as Treasury yields cratered Monday. However, as the week went on, anxiety over the growing supply-demand imbalance for government debt as Thursday’s 30-year Treasury bond auction tailed significantly. Additionally, the September CPI report, also released Thursday, showed that the pace of “disinflation” has slowed for the second consecutive month. Corporate and municipal bonds underperformed Treasury bonds on the week as dealers and investors alike used the rally in rates to unload positions. All in all, the tone continues to feel quite ugly. Meanwhile, stocks were somewhat mixed as the 3rd Quarter earnings releases for the big banks came in stronger than expected. However, talk of an imminent earnings recession has begun to take over the conversation with regard to outlook.

    • The S&P 500 rose 0.41% for the week. The average daily move was 0.54%.
    • The NASDQ declined 0.18% for the week. The average daily move for the week was 0.71%.
    • The 2-year Treasury yield fell 2 basis points, closing at 5.06% on Friday. High year-over-year 5.18%, low yield 3.77%.
    • The 10-year Treasury yield dropped 19 basis points for the week, closing at 4.61% on Friday. Year-over-year high yield 4.80%, low yield 3.31%.
    • The VIX Index rose 9%, closing at 19.32 on Friday. Year-over-year high 34.45 and low 12.82
    • The MOVE Index increased 1.33% for the week, closing at 128.33 on Friday. Year-over-year high 198.71 and low 96.61.
    • 5-year Investment Grade Corporates (as measured by Markit CDX) spreads widened 2 basis points, closing at 77 basis points on Friday. High spread Year-over-year high 111 and low of 62.29.
    • 5-year High Yield corporate debt (as measured by Markit CDX) spreads increased 7 basis points, closing at 499 basis points on Friday. Year-over-year high 568, and low 408.
    • US Dollar Index was strengthened 0.57% for the week, closing at 106.65 on Friday. Year-over-year high 114.11 and low 99.77.
    • WTI Crude rose 5.92% for the week, using the November WTI Futures contract, closing at 87.69 on Friday. Year-over-year high 93.68, and low 66.74.  
    • Gold, as measured by the December futures contract, surged 5.20% for the week, closing at 1,942 on Friday. High price for the front contract year-over-year 2,056 and low 1,624.
    • Bitcoin dropped 3.64% for the week closing at 26,977 on Friday. High price year-over-year 31,386 and low 15,632.

    The Week Ahead  

    We come in this morning with Treasury yields higher, led by the long end of the curve while equities are up a fair amount. Geopolitical tensions dominate as it appears Israel is ready to launch a bloody ground invasion of Gaza. Focus, from a geopolitical perspective, is zeroing in on Iran and its proxies as to how involved they plan on getting. The U.S. will have two carrier task forces in the region to persuade them to stand down somewhat. Currently risk markets are somewhat ignoring the conflict with the thought (hope?) that the events in the Middle East stay contained. On the economic data front we get September Retail Sales Tuesday. For stocks, 3rd quarter earnings season begins to kick it into high gear. This week we also have a steady dose of Fed speakers. On Thursday, Chairman Powell speaks in New York.



    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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