Daily Market Color

Putting the Wild Week in Perspective

Jeff Davenport

It’s been a volatile week in financial markets, featuring historic swings in equity prices that have brought major indices in and out of significant 10%? correction territory on a daily basis.  Last year’s tranquility in markets seems like a distant memory as the CBOE VIX climbed almost 70% during this week.       



As seen below, the S&P 500 lost more than 5% of its value during this week alone and is nearly 10% lower than its all-time high achieved on January 28th.  However, all three major equity indices finished the week on a high note, gaining roughly 1.4% on the day.   



Treasury yields/swap rates gapped lower during Tuesday’s session, but have since recovered and are within 5bps of their highest levels in the past four years.  The yield on the 10-year note is currently holding near 2.85%.       



The bearish market sentiment spilled into commodity markets, specifically crude oil futures where increased US production had already weighed on prices, even in the face of OPEC’s supply cutting agreement.  WTI crude posted a weekly loss of almost 10%, with the price of barrel falling to $59 – its lowest level since the end of December 2017.  



Last Friday’s payroll data has been pointed as a potential tipping point for the surge in volatility.  The increase in average hourly wages foreshadows a long-awaited pickup in inflation, which would then guide the Fed to accelerate its rate hiking schedule and tightening of monetary policy.  With that in mind, next week’s release of consumer price data will be closely scrutinized, where a 0.1% MoM rise in headline CPI and 0.3% increase in core CPI is expected.

Spending Bill Gets Finalized

The second government shutdown of this year lasted a mere few hours as lawmakers worked through the early hours of the morning to finalize a bipartisan budget deal which adds $300 billion to the cap over the next two years.  Confirming previous reports, defense and domestic spending were allotted the bulk of the funding — $165 billion and $131 billion, respectively.  There was significant pushback on the final terms of the agreement which ultimately pushed negotiations past the midnight deadline, including a last minute objection from Republican Senator Rand Paul and DACA-fueled opposition from House Democratic Leader Nancy Pelosi.  “Neither side got everything it wanted in this agreement, but we reached a bipartisan compromise that puts the safety and well-being of the American people first,” House Speaker Paul Ryan stated in a press conference afterwards.          

Jeff Davenport

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