Mixed Data Amongst Equities Despite Higher Interest Rates

Market Down and Dirty

Last Week’s Economic/Market Summary


  • U.S. equities ended the week mixed despite higher interest rates.
    • S&P 500 +0.47% Dow -0.02% Russell 2000 -0.63%, Nasdaq +0.95%[1]
      • The All-Country World Index dropped -0.42%.1
    • S&P 500 sub-sectors were mostly negative last week.
      • Technology & Healthcare led to the upside.
      • Energy, Staples, Real Estate, & Utilities led to the downside.
    • The CBOE Volatility Index (VIX) ended the week slightly lower at 17.45. 1
  • US Treasury bond yields were higher last week.
    • US 2yr +0.05% at 5.08%, 10yr +0.19% to 4.78%, 30yr +0.22% to 4.95%.1
    • Longer dated yields surged to highs not seen since 2007. 1
  • Commodities as an aggregate asset class were mostly lower last week.
    • WTI Crude sank -8.83%.1
    • Gold was declined -0.93%.1
    • The US Dollar index was flat at -0.08%.1
  • In our opinion, U.S. economic data continued to be mixed last week.
    • Job market data came in well ahead of consensus continuing to show resilience. 1
    • Measures of consumer credit came in well below expectations. 1
    • Two measures of manufacturing came in slightly better than expected. 1
  • An index of equities outside the US (FTSE All-World ex-US) declined -0.62%.1


  • US Equities mostly rose last week despite yields rising further.
    • Underpinning the resilience is a view that the economy remains strong enough for financial markets to withstand higher borrowing costs.
      • Time will tell but in the immediate term, domestic markets have found support levels after being oversold by almost all technical measures.
    • The recent downturn appears driven by the interest-rate risk posed by the persistent strength of the economy, not a slowdown that would batter corporate profits.
      • Friday’s gain in the face of unexpectedly strong employment data shows the market is proving resilient.
  • S&P 500 subsectors were mostly negative last week.
    • Tech, Communication Services, & Healthcare were the only positive sectors.
    • Energy led to the downside by a wide margin following crude oil’s steep sell off.
      • It remains in a positive trend and this appears to be simple profit taking.
  • The VIX volatility index declined slightly in the week over week timeframe although intraweek, it came down a large amount from its highs.
    • 30 day realized volatility remains well below its 5 year average levels. 1
    • Despite this, expected future volatility is significantly above the current VIX levels.
      • This could provide a tailwind to stocks in the near-term as institutional players look to capitalize by selling volatility.
  • US Treasury yields were higher across the maturity curve last week, led by the 10yr & 30 yr.
    • Yields on the 10-year US Treasury surged to a 16-year high last week while those on 30-year notes vaulted past 5% for the first time since 2007. 1
      • Yields got another boost on Friday after bigger-than-expected surge in US payrolls that bolster the case for more Fed rate hikes.
    • Alongside the turmoil in Treasuries, US investment-grade corporate bond spreads widened to a still-modest 1.27% this week, versus 3.70% in the early days of the pandemic. 1
    • While the corporate bond market has handled rising rates without any signs of stress, there’s still a lot of debt that matures over the coming 2 years at much higher costs.
  • Investors are waiting for earnings reports in the coming weeks that will show how much of the economy’s recent strength has filtered down to corporate profits.
    • Companies in the S&P 500 are expected to notch the 4th straight quarter of profit declines, but they will also provide outlooks for where earnings are headed.
      • We believe the latter is what will carry the most relevance to investors’ positioning.
    • The post-Covid economy has fed investor doubts by consistently catching markets by surprise, first with the persistence of inflation and now with how resistant it has been to the Fed’s most aggressive rate hikes in four decades.
      • Yet that strength is a double-edged sword: By giving the central bank reason to keep rates elevated, it’s also increasing the risk that parts of the economy will snap, resulting in a recession instead of the soft-landing investors have started betting on.

Ryan A. Mumy, CFP®,

AIF® – Chief Investment Officer

Contact: 828/855-9400
info@CIASonline.com or rmumy@bloomberg.net 

 1 Source: Bloomberg – 10/6/2023 

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