The bloodshed continued last week as the major indices all dropped at least 5% while the MSCI emerging markets index fell 7.15%.
The selling began on January 26th in the S&P 500 ramped up last week. Altogether, the losses reached 11.77% before finding a short-term bottom on Friday.
Monday saw the largest intraday loss since August 18th, 2011 as the S&P fell 4.1% by the close. Tuesday’s gains helped to offset some of the losses on the week before the selling resumed on Wednesday.
When the week was over, January’s gains were given back, along with December’s, as the S&P 500 ended where we were back at the end of November 2017.
2017 was a year of record low volatility. This continued into January of this year. However, the VIX spiked as January rolled into the first full week of February, reaching levels in volatility not seen since the flash crash of summer 2015.
Concerns initially revolved around the 10-year treasury rates as they hit a 4-year high. However, interest rates fell ever so slightly on the week as yields closed at 2.83%.
The CME FedWatch Tool still anticipates a rate increase at the March meeting as the probability of a 25-basis point rate increase held at 76.1%; the same level that we were at on Friday the 2nd.