Market developments
Equities:
The U.S. stock market has been volatile due to geopolitical concerns, rising Treasury yields, and worries about higher interest rates. Of the 86 companies in S&P 500 that have announced results through Friday morning, 74% beat analysts’ estimates, with strong prints from the major U.S. banks and Netflix. Despite positive corporate earnings results, there’s a sign of mounting distress as the VIX moved higher. Geopolitical risks and inflationary concerns, especially related to energy, are contributing to uncertainty. Equities closed lower across the globe as the S&P 500 and TSX were down -2.4% and -1.7% respectively.
Fixed income:
U.S. corporate debt markets are showing signs of weakness, with risk premiums rising for investment-grade corporate bonds and junk bonds. Even asset-backed securities are affected, with companies having difficulty selling debt. The selloff in Treasuries has affected corporate credit markets, with Treasury yields reaching their highest levels in years as the U.S. 10yr closed above 4.9%.
Commodities:
Oil prices were up 1.2% this week and closed just below $89, even as prices dropped on Friday as Israel agreed to delay a ground offensive in Gaza. The ongoing tensions and tight oil supplies due to OPEC+ cuts and Saudi Arabia’s production reduction are expected to keep prices elevated.