In an action-packed week, the equity markets continued the big equity rotation trade where the high-flying “Big Tech” and “Fintech Disrupter” stocks lost more ground to value stocks, such as banks. A good example of the activity could be found in two Exchange Traded Funds. Cathy Wood’s Ark Innovation (ticker: ARKK) fell 9% week-over-week, while Invesco’s ETF that tracks the KBW Bank Index (ticker: KBWB) advanced 4%, setting a new all-time high on Friday.
Meanwhile, the Treasury yield curve flattened four basis points, two-year to 10-year. The biggest event for the week came on Friday, as employment figures for April recorded a huge miss as economists expected approximately 1,000,000 job gains and only got 266,000. The miss threw more fuel on the debate over President Biden’s huge fiscal spending proposals and whether the Fed may end up behind the curve on inflation.
- The S&P 500 advanced 1.2%. The average daily move was .51%. On Friday, the index scored a new, all-time high.
- The NASDAQ fell 1.5%. The average daily move for the week was .80%.
- The two-year Treasury yield dropped a little over one basis point, closing at .146% on Friday.
- The 10-year Treasury yield fell five basis points for the week, closing at 1.58% on Friday.
- The VIX Index declined 10% for the week, closing at 16.69 on Friday.
- The MOVE Index decreased 7% for the week, closing at 54.13 on Friday.
- Five-year Investment Grade Corporates (as measured by Markit CDX) were unchanged for the week, closing at 51 basis points on Friday.
- High-yield corporate debt (as measured by Markit CDX) widened one basis point for the week, closing at 290 basis points on Friday.
- U.S. Dollar Index rose 1.2% for the week, closing at 90.23 on Friday.
- WTI Crude rose 2.1% for the week, using the June WTI Futures contract, and closing at 64.90 on Friday.
- Gold, as measured by the June 2021 futures contract, advanced 3.6% for the week and closing at 1,831 on Friday.
- Bitcoin rose 2.2% for the week, closing at 58,712 on Friday.
The Week Ahead:
Over the weekend, it was revealed that cybercriminals hacked the “jugular vein” of the East Coast’s gasoline supply, the Colonial Pipeline last Thursday. The criminal enterprise “Darkside” is holding vital data hostage and has threatened to release hacked data if a ransom is not paid. The pipeline was shut down Friday, and, as of this morning, remains shut down. As of this writing, officials responsible for the pipeline do not have an answer as to when the gasoline can start flowing at full capacity again.
Fuel prices are expected to surge as the attack seems to have been strategically planned right in front of the summer driving season. Some market commentators are comparing this brazen attack to the OPEC oil embargos of the 1970s.
Meanwhile, we have a heavy economic data week, with key inflation readings (CPI and PPI) Wednesday and Thursday, and April Retail Sales on Friday. Good times.
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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