The major US equity indexes closed modestly lower for the week after recovering from the biggest sell-off in nearly two years. The S&P 500 Index neared correction territory (down over 10% from its peak) on Monday morning while the Nasdaq was down 15.8% from its peak. Even more pronounced were the swings in the CBOE Volatility Index (VIX) – the fear gauge - which briefly spiked Monday to 65.7, its highest level since late March 2020, before falling back to end the week at 20.6. A recent increase in Japanese short-term interest rates, albeit modest, seemed to result in a partial unwind in the so-called carry trade. A sharp rise in the yen over the preceding few weeks made the trade unprofitable, causing many investors to pull out of their positions. On the macro side, several major companies reported signs of weakening consumer demand during earnings calls. However, S&P’s gauge of services sector activity remains solidly in expansion territory at 55.5. A reassuring drop in weekly jobless claims on Thursday seemed partly responsible for a bounce-back rally, with the S&P 500 scoring its best daily gain since November 2022. Japan’s stock markets started the week with the most severe one-day sell-off in decades (-12%). By the end of the week, Japan’s markets had recouped much of the lost ground, however, with the Nikkei 225 Index down 2.5%. The dollar ended lower on the week while Gold ended marginally lower on the week. In Fixed Income, the US 10-year Treasury yield increased over the week. Cryptos rebounded.
Have a great week-end
Charles for the team