While the major stock indices continued to grind higher and Treasury yields drifted in a very tight range, last week was still quite interesting. Retail investors, the new 800-pound gorilla, drove their new love interest, AMC, up 83% for the week. At one point on Tuesday, the stock was up over 140% from the prior week’s close. Other favorites such as Koss, Bed Bath and Beyond, and Blackberry were also driven to the moon. It appears that short sellers have not learned the GameStop lesson that essentially tells them that they should move to the sidelines until the "Reddit Crowd” is broken. With their penchant for leverage and focus on companies that have not really been relevant in a decade or two, that “breaking” will happen at some point. Until then, however, short selling is an extremely dangerous game. Meanwhile, the economy continues to recover from the pandemic, as Friday’s employment report booked solid gains. Commodities continued to surge as crude closed Friday at its highest level since 2018.
- The S&P 500 rose 0.59%. The average daily move was 0.34%.
- The NASDAQ advanced 0.48%. The average daily move for the week was 0.68%.
- The two-year Treasury yield increased one basis point for the week, closing at 0.148% on Friday.
- The 10-year Treasury yield decreased four basis points for the week, closing at 1.56% Friday.
- The VIX Index was steady for the week, closing at 16.42 Friday.
- The MOVE Index was dropped 4.3% for the week, closing at 49.78 on Friday.
- Five-year Investment Grade Corporates (as measured by Markit CDX) were unchanged for the week closing at 51 basis points Friday.
- High Yield corporate debt (as measured by Markit CDX) tightened one basis point for the week, closing at 287 basis points on Friday.
- U.S. Dollar Index was flat on the week, closing at 90.136 on Friday.
- WTI Crude rose 5% for the week using the July WTI Futures contract, closing at 69.62 Friday. Crude is now higher than any point since October 2018.
- Gold, as measured by the August 2021 futures contract, fell 0.7% for the week closing at 1,892 on Friday.
- Bitcoin was flat for the week, closing at 39,274 Friday.
The Week Ahead
Stocks are down slightly, and Treasury yields are mostly unchanged as we start the week. Over the weekend, Treasury Secretary Yellen made a mostly innocent remark that relatively higher interest rates would be good for both the Fed and the economy. It was quite telling that stocks initially shuddered at that bit of news as trading began in Asia. Stocks and other risk assets continue to be priced to perfection. This week, we will get the first inflation data for May on Thursday with the CPI. Economists polled by Bloomberg are expecting a 4.7% year-over-year increase to core CPI. The month-over-month CPI ex food and energy is expected to have increased 0.4%.
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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