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WEEKLY SUMMARY: VIX hits lowest level since late 2021
The major US equity indices ended mixed following a week while the Cboe Volatility Index (VIX), Wall Street’s so-called fear gauge, fell to its lowest level since late 2021. 88 S&P 500 Index companies had reported earnings as of Friday. Financials outperformed overall during the week despite a brief plunge in shares of Goldman Sachs after the investment banking giant missed consensus revenue estimates. US economic data were mixed: Weekly jobless claims rose a bit more than expected, but continuing claims jumped by much more than anticipated and reached their highest level (1.87 million) since November 2021. Housing data were also soft, with starts and permits slowing from February’s readings. Existing homes sales fell, and year-over-year home prices dropped 0.9%, the largest decrease in 11 years. However, S&P Global US PMIs painted a much different picture as it rose to its highest level in almost a year (53.5). The yield on the 10-year U.S. Treasury note jumped following the S&P Global data release, reversing earlier declines and leaving it modestly higher for the week. The pan-European STOXX Europe 600 Index gained 0.45%, as optimism about the economic outlook outweighed concerns about interest rates staying higher for longer. Annual UK consumer price growth in March slowed by less than expected to 10.1% from 10.4% in February, driven by surging food and drink prices. Gold and cryptos slid as US Sovereign risk roared to record high.
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Most of US equities indices rose to record highs, as investors wagered that a “red sweep” (Republicans winning Presidency, Senate and Congress) would result in faster earnings growth, looser regulations, and lower corporate taxes. The small-cap Russell 2000 Index surged 8.57% for the week but was the sole benchmark to remain out of record territory. Meanwhile, the Dow Jones hit 44.000 for the first time while the S&P 500 closed just shy of 6,000, up 4.7% for the week, its best weekly gain in almost a year. On Thursday, the Fed announced a 25bps rate cut, its first easing move since cutting rates by 50 basis points in mid-September. In terms of economic data, the October ISM services sector activity came in at 56.0, well above expectations and the best reading since August 2022. U.S. Treasuries generated positive returns heading into Friday, as yields largely ended lower than where they ended the previous week.