Global stocks fell sharply for the second straight week, with equities having their worst week in more than two years.
All three of the major American indexes lost more than 5% despite rebounding nearly 1.5% on Friday, with most of that gain coming in the last hour of trading. It was a week of wild swings, with the Dow losing more than 1,000 points on Monday and Thursday – its two biggest daily point drops in history – and gaining more than 500 on Thursday. The difference between the Dow’s high point of the week on Monday and its low point on Friday was more than 2,100 points. The week’s volatility can probably be summed up in the VIX index, which jumped more than 67% by the end of the week, closing at 29.06 after briefly hitting 50 on Tuesday. All three major U.S. equity indexes are now negative for the year, with the Dow and S&P lower by about 2% and NASDAQ off 0.3%, but are down nearly 10% since peaking two weeks ago.
While most of the attention has been focused on the American market, foreign markets have actually fared worse, particularly in Asia. Both Shanghai and Hong Kong lost nearly 10% last week while Japan was off more than 8%. European stocks lost about 5%. Oil prices have also been hit with selling, with the price of U.S. crude down 9% last week after climbing more than 50% since last June. The U.S. benchmark ended the week at about $59. Gold has acted as a safe haven, although only in relative terms, losing “only” about 1.5% last week.
The bond market, which basically sparked the sell-off in stocks two weeks ago when yields spiked, was relatively quiet last week, at least compared to equities. The yield on the benchmark 10-year Treasury note ended the week at 2.85%, up only one basis point on the week after climbing 18 bps the week before; it’s still hovering close to a four-year high. But there was a lot of volatility in the fixed-income market, too, as the yield on the 30-year Treasury bond rose seven bps to 3.16%, its highest level since last March, while the two-year note fell by the same amount to 2.07%.
Investors largely ignored the thin slate of economic reports last week, which continued to come in strong. Initial unemployment claims for the latest week fell by 9,000 to 221,000, a new 45-year low. The Institute for Supply Management’s non-manufacturing index jumped four points to 59.9, its highest level dating back to 2008.
Reports/dates/facts/links worth paying attention to over the next week:
1. February 14: Consumer price index for January; retail sales for January.
2. February 15: Weekly unemployment claims; producer price index for January; industrial production for January; Philadelphia Fed business outlook survey for February; Empire State manufacturing survey for February; National Association of Home Builders housing market index for February.
3. February 16: Housing starts for January; University of Michigan consumer sentiment index for February, first reading.