Aviso Weekly Market Monitor: January 30th – February 3rd

Feb 6, 2023

Market developments

Equities:
The U.S. market ending the positive week with a negative day on Friday as the combination of Amazon, Alphabet and Apple earnings drove the market lower. The S&P 500 gained over 1.6% and the Nasdaq rose +3.3% for the week as investors believe the economy is on firm footing, the Federal Reserve signalled they are near the end of this tightening cycle and Meta gained ~20% after a strong quarter. Warnings from large tech companies, along with a surprisingly strong jobs report drove the S&P 500 down -1% on Friday and the Nasdaq -1.5%. Europe ended the week +1.2% as lower than expected inflation and the signal that the end of the tightening cycle is in sight drove equities higher.

Fixed income:
The fixed income market reacted more rationally after the FOMC announcement, as shorter duration treasuries spiked now that additional rate increased are expected. The 2yr U.S. Treasury yield climbed by 10bps to 4.29% for the week after a 19bps jump or Friday, while the 10yr U.S. Treasury yield remained relatively unchanged at 3.52% for the week after a 13bps increase to end the week. The U.S. market is now pricing in a higher peak rate (~5%) and a higher rate to end 2023 compared to a week ago.

Commodities:
Oil dropped by 8% this week, closing at $73.24 as longer-term headwinds drove the price down. The record low unemployment in U.S was overwhelmed by the concerns of stockpiling inventory in the U.S. and weaker than expected demand from China.

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