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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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Stocks were volatile this week with continued rotation in market leadership to small-cap and value shares. U.S. markets initially rallied to new-highs but faded toward week's end, led by weakness in the tech sector. The S&P 500 and Nasdaq closed lower on the week, while the Dow posted a solid gain. Value stocks outpaced growth stocks by 477 basis, as measured by Russell indexes—the largest divergence since March 2023. The week was also notable for a widespread global disruption to computer systems early Friday due to an error in a vendor’s security update to some users of the Microsoft operating system.