The S&P500 finished the week down over -4.5%, the Nasdaq down -4.7% and the TSX around -4% as the turmoil caused by SVB Financial Group created concern within the banking sector and led to a spike in market volatility as the VIX hit 29 on Friday. Investors will shift their focus to the inflation data next week as they weigh the probability of a 50bps rate hike in March vs previous estimates of 25bps.
The bond market rallied on Friday as traders are now expecting a 25bps rate hike in March and lowered the overall expectations for peak rates by nearly 40bps. This move was driven by the jobs numbers on Friday that showed a tick up in the unemployment rate in the U.S. and slower than expected wage growth. The US 10yr closed more than 25bps lower at 3.68% and the Canadian 10yr was also down, closing at 2.99%
Oil closed higher on Friday after better-than-expected U.S. jobs data, but still finished the week down -4%. Expectations of rising interest rates in the U.S. and Europe clouded the outlook for growth and pressured oil earlier in the week. Like other assets, next week’s inflation will be crucial as the need for higher rates will increase the likelihood of a recession and potentially impact the demand for oil.