August 24, 2015 — Equity markets plunged this past week as investor concerns intensified over slowing global growth, particularly within China. The Dow Jones Industrial Average and S&P 500 each had their worst weekly performances since September 2011 when the U.S. credit rating had just been downgraded and the European debt crisis was at its peak. Friday’s selloff was sparked by a report showing further erosion in Chinese manufacturing, its fifth monthly contraction, sending China’s Shanghai Composite down 4.3%. The Dow fell 3.1% on Friday, extending a loss to 10% since its all-time high on May 21. Notably, over 6.5% of that loss came after China’s decision to devalue its currency last Tuesday.
Volatility surged in the U.S. and abroad. The CBOE VIX volatility index more than doubled during the week. The STOXX Europe 600 index and Hong Kong’s Hang Seng Index both joined the Shanghai Composite Index entering a bear market, down over 20% from their 2015 peaks. Gold and Treasuries rallied as investors bought traditional safer-haven assets. Treasuries had their largest weekly gains in five months, while yields declined. Meanwhile, oil prices tumbled below $40 per barrel for the first time since March 2009, extending the longest decline since 1986.
For the week, both the Dow Industrials and S&P 500 fell 5.71%. The NASDAQ Composite lost 6.73%. All ten major sectors, within the S&P 500, fell on the week, with Energy (-8.48%), Technology (-7.30%) and Financials (-5.88%) losing the most. Utilities (-1.16%) and Telecom (-2.63%) fell the least. Gold prices continue their recent rally, with the S&P GSCI Gold Index advancing 4.2% last week. On the other hand, oil continued its decline as the GSCI Crude Oil Index fell 6.2%. Market volatility sent investors into safe-haven Treasuries as the ten year U.S. Treasury yield now hovers around 2.04%.
Equities Finish the Week Lower as Rate Normalization Looms
August 17, 2015 — Stocks ended a volatile and choppy week positive, as investors reviewed the latest economic data and welcomed China’s first rise on the yuan since Tuesday’s surprise currency devaluation. The CBOE’s VIX volatility index surged over 12% on Tuesday, and investor temperament eased to end the week down a little over 4%. The yuan devaluation proved most challenging to emerging markets, with the MSCI Emerging Markets Index retreating 2.33% last week.
Tuesday’s retail sales report was among the most important U.S. economic data point last week, rising 0.6% in July while June was revised, from an initial reading of -0.3%, to that of unchanged. May retail sales were also revised to a 1.2% gain from 1%. Importantly, May and June revisions will likely point to an upward revision for 2Q GDP. Friday’s rise in industrial production also drew cheers, surpassing economists’ consensus forecasts with a gain of 0.6% versus 0.3% expected. Factory production, a sub-set of overall production, increased 0.8%, the strongest gain since last November. Also on Friday, the Producer Prices Index (PPI) increased at a 0.2% annualized pace, down from 0.4% in May.
For the week, the Dow Industrials rose 0.67%; the S&P 500 gained 0.73%; and the NASDAQ Composite returned 0.12%. All ten major sectors, within the S&P 500, advanced on the week, with Energy (+3.5%), Utilities (+2.66%) and Industrials (+1.29%) performing best. Consumer Discretionary (+0.12%), Healthcare (+0.09%) and Consumer Staples (+0.05%) rose the least. Gold prices rallied the most since June, with the S&P GSCI Gold Index advancing 1.7% last week, while the GSCI Crude Oil Index fell 1.95%. The ten year U.S. Treasury yield rose just two basis points during the week, ending at 2.20%.
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