(05/06–05/12)

At the close of Refinitiv Lipper’s fund-flows week, U.S. broad-based indices each logged their worst performing week in more than five weeks. Russell 2000 (-4.74%), NASDAQ (-4.05%), S&P 500 (-2.51%), and DJIA (-1.88%) all finished deep in the red. Overseas, broad-based global indices Shanghai Composite (+0.92%), FTSE 100 (+0.85%), and DAX 30 (+0.45%) recorded positive performances. The 10-two Treasury yield spread rose 7.23% to 1.53, while the indicator for expected market volatility over the next 30 days (VIX) rose 51.26% to 27.59.

On Thursday, May 6, U.S. equity markets closed the session slightly in the black. DJIA (+0.93%) was the daily winner, while the NASDAQ (+0.37%) ended a four-day losing streak. Positive ADP private sector job data reported April employment increased by 742,000 jobs from March — the largest month-over-month increase in six months. The Department of Labor (DOL) also reported a seasonally adjusted initial jobless claims of 473,000, marking the lowest weekly level since the start of the pandemic. The VIX closed the day at 18.24. Friday was a different story for job data, as investors were floored by the DOL reporting nonfarm payrolls employment only rose by 266,000 in April — drastically missing the forecasted mark of an increase of one million. The unemployment rate (6.1%) rose for the first time since last April as nonfarm employment is still down 8.2 million from pre-pandemic levels. Even with the negative news, U.S. broad-based indices ended the day with positive daily performance. After Treasury Secretary Janet Yellen walked back her recent comments geared towards raising rates, investors appear to be betting that Friday’s weak job data will continue to fuel the Federal Reserve’s accommodative monetary policy. The 10-year Treasury yield rose for the first time in five sessions and the VIX ended the week ended the near 52-week lows at 16.84.

While the corporate earnings season may be slowing down, market uncertainty and inflationary fears appear to be picking up. Monday saw negative performance from U.S. broad-based equity markets, with the small-cap focused Russell 2000 (-2.59%) and tech-heavy NASDAQ (-2.55%) realizing the largest declines. The VIX rose 16.03% as investors start to question the Federal Reserve’s stance on price level increases being “transitory.” Demand surges amid a fuel pipeline shutdown (due to a cyberattack) have led to supply-chain constraints that have many market participants fearing both temporary and permanent price level increases. On Tuesday, U.S. equity markets fell for the second straight day as investors prepared for Wednesday’s CPI data.

Wednesday, March 12, ended our Lipper fund-flows week with CPI data revealing a 4.2% increase compared to expectations of a 3.6% increase — revealing the largest 12-month increase since September 2008. Although the year-over-year number is amplified due to the economy being completely shut down last April, the one-month increase of 0.8% was also greater than estimations. The two largest month-over-month increases from the CPI data were Used Cars and Trucks (+10.0%, its largest monthly increase to date) and Transportation Services (+2.9%). Pair these increases with the leisure and hospitality industry recording the largest hiring gains in the most recent nonfarm payrolls report and we can certainly see an increase in the demand for travel.

U.S. equity markets fell drastically Wednesday following the CPI data. DJIA (-1.99%) and S&P 500 (-2.14%) each posted their lowest daily returns since January and February, respectively. The VIX closed the fund-flows week at 27.59 — its third straight day of sharp increases. The 10-two Treasury yield rose by the largest amount since March (+4.44%).