Last week we saw a softer tone in the market, with the S&P 500 equities index down for the first time since early September, closing 1% lower on a weekly basis. The performance was driven by a combination of profit taking, mixed earnings reports and interest rates consolidating at high levels. Credit markets followed through, with bonds spreads 2 to 10 bps wider. US Treasuries yields saw intense volatility but finished roughly unchanged.
Despite the weak performance, the equities market is still trading near its historical high and earnings season will continue to dictate overall risk sentiment in the short term, along with the payroll data out this Friday. After solid banking results during the kick-off of the season, the market will closely follow the announcements from the tech sector, and the impact of artificial intelligence investments. Tesla reported stronger than expected earnings and five of the “Magnificent 7” companies report this week.
In the geopolitical space, particularly in the Middle East, Israel's restrained military response to Iran led to oil prices trading lower.
