Equities Experienced A Fairly Broad Retreat This Week.
The negative price action was mostly predicated on interest rates angst with some risk aversion related to the Israel-Hamas war piled on by Friday. The uncertainty surrounding a potential ground invasion by Israeli forces into Gaza weighed on sentiment ahead of the weekend due to the understanding that participants cannot react in real-time while the markets are closed for trading.
Treasuries continued to act in a volatile manner that resulted in the 10-yr note yield crossing 5.00% at its high this week for the first time since 2007. Ultimately, the 10-yr yield jumped another 29 basis points this week to 4.92%. The 2-yr note yield rose four basis points this week to 5.09%.
Volatility in the Treasury market was partially a reaction to Fed Chair Powell's speech at the Economic Club of New York on Thursday. His prepared remarks seemingly corroborated the popular view of late that the jump in long-term rates has helped to tighten financial conditions, paving the way for the Fed to proceed cautiously. In answering a question, though, Mr. Powell acknowledged that the economic evidence is not indicating that the Fed is too tight yet with its policy.
Another sticking point for the stock market was the ongoing dysfunction in the House of Representatives. Following three failed rounds of voting this week, Rep. Jim Jordan (R-OH) lost the status of Speaker of the House nominee after a GOP conference vote went against him by a "wide margin," according to Punchbowl News. The House will now head home for the weekend without another vote, according to CNBC.
Data this week painted a mixed picture of the economy. Retail sales were stronger than expected and weekly initial jobless claims hit their lowest level since January. Meanwhile, the existing home sales report was the weakest since October 2010 and the Leading Indicators index was negative for the 18th consecutive month.
Earnings news was also somewhat mixed. Netflix and Tesla were among the standouts, along with Dow components Travelers, Procter & Gamble, and American Express.
Only two of the S&P 500 sectors logged a gain this week -- consumer staples (+0.7%) and energy (+0.7%) -- while the real estate (-4.6%) and consumer discretionary (-4.4%) sectors saw the biggest declines.
Nasdaq Composite: -3.2% for the week / +24.1% YTD
S&P 500: -2.4% for the week / +10.0% YTD
Dow Jones Industrial Average: -1.6% for the week / -0.1% YTD
S&P Midcap 400: -2.0% for the week / -1.5% YTD
Russell 2000: -2.3% for the week / -4.6% YTD