Last Week Artificial Intelligence (AI) mania hit the Street last week driving the tech-heavy NASDAQ up over 2.5%. The rally was led by NVIDIA, the leading maker of chips needed for artificial intellig...
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Last Week
This week began with the end of Liz Truss’ 44-day reign as the U.K. Prime Minister—as she and her economic plan were tossed to the curb. Markets reacted positively at first with Gilt yields falling and the GBP strengthening. However, by week’s end, we returned to the reality that the U.K. is an economic and political mess and yields and currency reversed course.
Meanwhile, in the U.S., both rate and equity volatility were severe as thoughts of a Fed pause… paused. On Thursday, the 2-year Treasury note closed at 4.61% and the additional probability of more restrictive monetary policy seeped into 2023 projections. However, on Friday, San Francisco Fed President Mary Evans stated that the Fed would soon begin debating on when they should start to moderate hikes after their November meeting. Before the Evans news, OIS swaps and Fed Fund futures had pushed the expected fund’s rate in mid-2023 up to 5% and the two-year Treasury note surged over 4.6%. After Evans’ comments, both rates fell back to 4.88% and 4.5%, respectively.
Stocks had a big week, with the S&P up 4.7%. In the last 30 trading days, the S&P 500 has ended in positive territory ten days, and on a percentage basis on those days, they increased on average 1.85% suggesting that the rallies are more of the “Bear-Market” variety.
- The S&P 500 rose 4.7% for the week. The average daily move was 1.53%.
- The NASDAQ surged 5.2% for the week. The average daily move for the week was 1.62%.
- The 2-year Treasury yield fell 2 basis points, closing at 4.48% on Friday. On Thursday, a new year-over-year high was set at 4.61%, a low yield of 0.20%.
- The 10-year Treasury yield rose 20 basis points for the week, closing at 4.22%, a new year-over-year high on Friday. Year-over-year high yield 4.02%, low yield 1.24%.
- The VIX Index fell 7% for the week, closing at 29.69 Friday. Year-over-year high 36.45 and low 15.01.
- The MOVE Index rose 2.6% for the week, closing at 156.95 on Friday. Year-over-year high 160.72 and low 51.73.
- 5-year Investment Grade Corporates (as measured by Markit CDX) spreads tightened 10 basis points for the week closing at 94 basis points Friday. High spread Year-over-year high of 111 and low of 49.
- High Yield corporate debt (measured by Markit CDX) tightened by 53 basis points, closing at 542 basis points on Friday. Year-over-year high 627, and low 288.
- The U.S. Dollar Index fell 1.1% for the week closing at 112.012 on Friday. Year-over-year high 114.11 and low 93.34.
- WTI Crude rose 0.5% using the December WTI Futures contract, closing at 85.05 Friday. Year-over-year high 123.70, and low 65.57.
- Gold, as measured by the December 2022 futures contract, rose 0.5% for the week closing at 1,656 on Friday. The high price for the front contract year-over-year is 2,043 and the low of 1,633.
- Bitcoin was unchanged, closing at 19,182 on Friday. High price year-over-year 67,734 and low 17,785.
The Week Ahead
We have a big economic data week with housing, durable goods, and inflation data being the focus. On Friday, the highlight will be September PCE, the Fed’s preferred measure of inflation. On Tuesday, Treasury will auction off $42 billion 2-year notes, followed by $43 billion 5-year notes, and $35 billion 7-year notes on Wednesday and Thursday consecutively.
The highlight of the week, barring any disasters, will be Big-Tech earnings releases led by Google, Meta, Amazon, Apple, and Microsoft.
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 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. 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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