Aviso Weekly Market Pulse: February 6th – February 10th

Feb 13, 2023

Market developments

Equities:
The U.S. market fell over 1% this week, led by a sell-off in the Technology sector, as a handful of Fed speakers re-emphasized the potential for interest rates to move higher and stay higher for longer. Q4 earnings continue to surprise to the upside, even as 2023 earnings estimates move lower and signal little-to-no growth this year. The most notable earnings release was Disney, who saw their stock price jump as they announced a massive cost cutting initiative and layoffs under the leadership of Iger, who returned as CEO in November. All eyes will be on the CPI print next week as we wait and see if the Fed’s tightening cycle has helped bring inflation down.

Fixed income:
This marked the worst week for the Treasury market in 2023, with investors realizing that the Fed may have to keep rates higher for longer. Trades in the derivatives market are predicting a 6% peak Fed rate, which is ~85bps higher than current market expectations. The Canadian 10yr also closed almost 25bps higher this week based on data signaling the labour market remains tight.

Commodities:
Oil climbed over 8% this week and finished strong on Friday after Russia announced a move against the price caps, with a plan to reduce output by 500,000 barrels per day in March. The announcement signals that Russia would rather give up volume than reduce their price. The week started strong on continued hopes of China demand would boost the commodity.

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