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CHART OF THE WEEK: S&P 500 vs. US 2s30s YIELD CURVE
US #stocks and the US yield curve are diverging meaningfully as the 2-year - 30-year Treasury Bond yield curve just inverted for the 1st time since late 2007 while the S&P 500 trades within 5% of its all-time-high.
WEEKLY SUMMARY: Worst quarter since early 2020 for the S&P 500
It was a mixed week for the major US equity indexes as the S&P 500 Index closed out its best month since December but its worst quarter since early 2020. Cyclicals stocks underperformed over the week, with financials and industrials sectors being among the losers. Stock prices fluctuated over the week in apparent response to the evolving situation in the war in Ukraine. After rising briefly on renewed Russia-Ukraine tensions, oil prices resumed their decline following the Biden administration’s announcement of an extended release from the nation’s Strategic Petroleum Reserve to combat inflationary pressures. On the macro front, most US reports came in roughly in line with consensus expectations. US job gains fell somewhat below expectations at 431k versus 490k, but the unemployment rate fell a bit more than expected, to 3.6%. U.S. Treasuries 10-year yield fell slightly, but the Bloomberg U.S. Aggregate Bond Index recorded its worst quarter since late 1980. Portions of the Treasury yield curve inverted over the week. European stocks gained in a choppy week of trading, as higher-than-expected inflation data boosted expectations for further interest rate increases and drove bond yields higher. Chinese markets advanced, as investors anticipated that Beijing would step in to support the country’s economy and markets.
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Most US equities indexes ended the week lower, although the tech-heavy Nasdaq Composite advanced modestly and cleared the 20,000 mark for the first time. The Russell 2000 Index recorded a second consecutive week of underperformance against the S&P 500 Index. Growth stocks posted a third consecutive week of outperformance versus value, thanks in part to gains in shares of Tesla (12%) and Alphabet (8.4%). On the macro-economic side, stagflation fears started to rise once again. Indeed, YoY CPI and PPI both accelerated. Meanwhile overall macro surprises disappointed for the fourth week in a row: on Thursday, the Labor Department reported a surprise jump in weekly initial jobless claims to a two-month high of 242,000.