Market Commentary - Week ending February 9, 2018 

Volatility returned to the US equity markets with vengeance, after a long period of lull . All the major indices were down for the year, however a late day rally on Friday ended the week on a high note. Our Short Term Indicator changed towards BEARISH for the past week. 

• It was yet another choppy week in markets. The US Equities extended there losses recording the  worst weekly equity performance in over 2 years with  S&P 500 down 5.10%. 

• For the week, the major benchmarks fell largely in tandem, and all of the major indexes entered “correction” territory (defined as a drop of more than 10% from their recent highs).   The S&P 500 entered a technical correction, down 10% from its last peak in January.The technology-heavy NASDAQ Composite closed at 6,874, a decline of -5.1%.  By market cap, small caps fared slightly better than large caps with the small cap Russell 2000 giving up “only” -4.5%, while the large cap S&P 500 lost -5.2% and the mid cap S&P 400 fell -5.1%. 

• CBOE Volatility Index popularly known as  VIX or fear gauge jumped 67%, 3 times higher than its lowest point. 

• U.S. 10-Year Treasury yield finished at 2.85%, at one point hitting 2.88% on concerns of spike in inflation and as a result Fed raising interest rates. If the rates continue their upward trajectory we could start seeing the equity markets cool off further.

• It was a sea of red around the world.  Canada’s TSX had its third consecutive loss for the week, falling -3.7%.  The United Kingdom’s FTSE fell -4.7%, while on Europe’s mainland France’s CAC 40 and Germany’s DAX each fell -5.3%.  In Asia, the sell-off was much more severe.  China’s Shanghai Composite plunged -9.6%, while Japan’s Nikkei ended down -8.1%, and Hong Kong’s Hang Seng plummeted -9.5%.  As grouped by Morgan Stanley Capital International, emerging markets lost -5.4%, while developed markets dropped an even deeper -5.5%.

• Precious metals aren’t exactly behaving like the “safe-haven” investments they’re often thought to be.  Even with the recent volatility, gold actually traded down last week, losing -1.6% to end the week at $1315.70 an ounce.  Silver fell a further -3.4% to end the week at $16.14.  Energy plunged along with the major world equity indexes, with West Texas Intermediate crude oil falling a whopping -9.6% to $59.20 a barrel, and Brent crude falling -8.2% to $62.71.  Copper, viewed by some analysts as an indicator of global economic health, fell for the fourth week in a row, dropping -4.8%.

• On the Economic front the number of Americans newly seeking unemployment benefits fell last week to 221,000, according to the Labor Department.  First-time claims dropped to their lowest level in nearly 45 years as the labor market remained tight.  Last week marked the 153^rd consecutive week that claims remained below the key 300,000 threshold that analysts use to indicate a healthy jobs market.  That is the strongest stretch since 1970, when the labor market was much smaller.  Overall, the labor market is near or at full employment, with the jobless rate at a 17 year low of 4.1%.  For more information click here 

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