Last week was wonderful in its ennui. After what has seemed an endless string of “exciting” weeks, this past week was downright boring! Stocks and credit-sensitive bonds ground higher and tighter last week as volatility plunged. Meanwhile, Treasury yields have really settled into a tight range. It feels as if the markets have gotten a bit more comfortable—or complacent—with its top risk, inflation. The Fed continues to claim that the price pressures we are witnessing are transitory in nature, the result of the economy emerging quickly from a deep freeze. Market participants seem to be disagreeing with their words, but they are agreeing, to a large extent, with their actions.
- The S&P 500 rose 1.2%. The average daily move was 0.32%.
- The NASDAQ advanced 2.1%. The average daily move for the week was 0.43%.
- The two-year Treasury yield declined one basis point for the week, closing at .143% on Friday.
- The 10-year Treasury yield decreased three basis points for the week, closing at 1.60% on Friday.
- The VIX Index plunged 17% for the week, closing at 16.76 on Friday.
- The MOVE Index dropped 4.7% for the week, closing at 52.04 on Friday.
- Five-year Investment Grade Corporates (as measured by Markit CDX) tightened two basis points for the week, closing at 51 basis points on Friday.
- High-yield corporate debt (as measured by Markit CDX) tightened 6 basis points for the week, closing at 259 basis points on Friday.
- U.S. Dollar Index was flat on the week, closing at 90.03 on Friday.
- WTI Crude rose 4.3% for the week, using the July WTI Futures contract, closing at 66.32 on Friday.
- Gold, as measured by the June 2021 futures contract advanced 1.4% for the week closing at 1,902 on Friday.
- Bitcoin dropped 7.3% for the week, closing at 39,196 on Friday.
The Week Ahead:
We come into the holiday-shortened week with global equities higher and Treasury yields up slightly. We will get employment numbers on Friday. Last month, we witnessed a shocking miss; economists projected one million new jobs and only got 267,000. It should be noted that the BLS numbers are partially model-driven. Many of the variables like the “Birth and Death” model are subject to pure estimates. The BLS has a good real-time view on companies failing (“death”) but not a good real-time view on companies being formed (“birth”). We have a feeling that May numbers will bring a stronger-than-expected gain and the April numbers will be revised upward. Why, you ask? Because a big surprise to the upside will cause the markets the most pain!
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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