Right on cue, volatility returned to the markets last week after a relatively quiet period the week prior. Inflation concerns picked up again, with Consumer Price Index (CPI) prints coming in higher t...
It was another rough one for almost every financial asset besides the U.S. Dollar. The grim picture in Europe became grimmer as Putin took the pipeline offline for “maintenance”. The Euro and Pound Sterling crashed with the Euro breaking convincingly through parity and the Pound setting an all-time low versus the dollar.
Europe is quickly coming to the reality that it is going to be a terrible winter. Here in the USA, stocks and corporate spreads suffered their second consecutive week of drubbings, while treasury yields gyrated.
Last Friday, we received the August Non-Farm Payroll Report. The numbers luckily did not repeat July’s shocker and there were some positive signs of workers reentering the workforce, which is a positive wage for inflation. However, the numbers were still strong and good news is bad news for stocks, credit spreads, and bond yields. Commodities were banged up with the Dollar on a historic tear.
- The S&P 500 slumped 3.2% for the week. The average daily move was 0.78%.
- The NASDQ fell 4.2% for the week. The average daily move for the week was .85%.
- The 2-year Treasury yield declined 1 basis point closing at 3.39% on Friday. The note’s yield traded as high as 3.50% on Thursday. High year over year 3.50%, low yield .20%
- The 10-year Treasury yield rose 15 basis points for the week, closing at 3.19% on Friday. Year over year high yield 3.47%, low yield 1.24%
- The VIX Index was unchanged for the week, closing at 25.47 Friday. Year over year high 36.45 and low 15.01
- The MOVE Index declined 1.8% for the week, closing at 120.72 on Friday. Year over year high 156.16 and low 51.73
- 5-year Investment Grade Corporates (as measured by Markit CDX) spreads widened 6 basis points for the week closing at 92 basis points Friday. High spread Year over year high 102 and low of 46.
- High Yield corporate debt (as measured by Markit CDX) widened 29 basis points, closing at 528 basis points on Friday. Year over year high 588, and low 273
- US Dollar Index rose 1.3% for the week closing at 109.53 on Friday. On Thursday, the index set a year-over-year high of 109.69. Year over year high 109.69 and low 92.03
- WTI Crude fell 6.7% for the week using the October WTI Futures contract, closing at 86.87 Friday. Year over year 123.70, and low 65.57
- Gold, as measured by the December 2022 futures contract declined 1.5% for the week closing at 1,722 on Friday. High price for the front contract year over year 2,043 and low 1,700
- Bitcoin dropped 3.3%, closing at 19,969 Friday. High price year over year 67,734 and low 17,785
The Week Ahead
We come in this morning with stocks higher and the Treasury yields higher from Friday’s close. The U.S. Dollar continues its rampage as the Japanese Yen and Off-Shore Chinese Renminbi are taking another hiding. The relief rally in equities and treasuries staged Friday, post-August NFP, is having a tough time holding.
While equities are up this morning, Friday was a tough one as the indices could not hold the morning gains and sold off sharply in the afternoon. While some of that was due to thin, pre-long weekend trading, it was not an optimistic sign.
Fed Chair Powell speaks at the Cato institute this Thursday morning. That should be the highlight of the week as the data calendar is relatively light.
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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