Equity markets: The S&P 500 rose 1.7% on the week to close at its highest level since early May. Somewhat surprising given the weakness in the highest profile earnings of the week — Apple and Facebook. On Friday word came out that Europe is talking about new steps to fix their ailing financial system. These rumors have become commonplace but for whatever reason the markets bought this one, sending markets soaring.
Bond markets: The European news was bad news for safe haven assets, with treasuries getting whacked hard. Because of Friday’s move the 10-year treasury yield finished the week at 1.54%, up 0.08% on the week.
Currency markets: The dollar fell 1% on the week — the bulk of the move happened on Thursday, not Friday, as the head of the European Central Bank eased concern over Spain’s finances, which led to a euro rally and dollar selloff.
Interbank markets: 12-month LIBOR was unchanged on the week at 1.06%.
Summary and next week: This week was the epitome of how short-term investors are struggling this year. The two big earnings data points, Apple and Facebook, were weak. The first reading of Q2 GDP came in at 1.5%, in-line with expectations. Yet an unexpected European headline on a quiet summer Friday afternoon led to a market surge.
Next week is a big data week, with the key ISM manufacturing survey as well as the July nonfarm payrolls report. After that it gets really quiet until Labor Day.
Equity markets: The S&P 500 rose 0.4%, as markets rose early in the week on the back of better than expected earnings in the technology sector (Intel, IBM, eBay, Qualcomm), before falling back on Friday as Europe took its toll once again. On the economic side housing data continued to brighten, with housing starts hitting a 4-year high.
Bond markets: The 10-year treasury yield fell 0.03% this week, from 1.49% to 1.46%. I plan on writing a post addressing why treasury yields remain so low in the near future.
Currency markets: The dollar rose 0.3% on the week, as euro weakness persists — since the start of May the euro has fallen from $1.32 to $1.22.
Interbank markets: 12-month LIBOR was essentially unchanged on the week at 1.06%.
Next week: The highlights of next week are earnings from two of the most widely-followed companies around — Apple and Facebook — as well as the first reading of second quarter GDP. And there’s this little athletic competition starting in London.
Equity markets: The S&P 500 rose 0.2% on the week. As we begin second quarter earnings season, attention is shifting from European headlines to the performance of US companies. On Tuesday markets fell as Cummins, a diesel engine manufacturer and bellweather of the industrial economy, issued a profit warning. Friday, markets surged as JP Morgan and Wells Fargo reported earnings, with markets reassured that core performance was okay and the JP Morgan “London Whale” trading loss was behind it. Next week starts the heavy part of earnings season, with companies like Intel, Microsoft, Google, and IBM all reporting.
Bond markets: The 10-year treasury yield fell 0.02% this week, from 1.51% to 1.49%. These low yields seem crazy, but as yields in core European countries continue to fall (Germany 10-year yields fell from 1.32% to 1.26% this week, French yields from 2.43% to 2.23%), US yields look relatively more attractive as a safe haven play.
Currency markets: The dollar was flat on the week, seesawing with the equity markets.
Interbank markets: 12-month LIBOR was unchanged on the week at 1.07% (insert Barclays joke).
Next week: In addition to a full week of earnings, the economic calendar picks up. We get the Empire State Manufacturing survey on Monday, Industrial Production on Tuesday, Housing Starts on Wednesday, and Existing Home Sales and the Philadelphia Fed Manufacturing survey on Thursday. Gear up — the next three weeks basically concludes the working portion of Wall Street’s summer. After earnings season, Q2 GDP released at the end of the month, and the ISM Manufacturing and Non-farm Payrolls releases the first week of August, it’s a ghost town in my world until Labor Day.