What a difference a month makes.
On Sept. 18, the U.S. stock market reached a record high after a mostly uneventful summer. Long-term interest rates headed higher, a sign that investors expected steady U.S. growth. A widely watched measure of volatility in the U.S. stock market was near its lowest level of the year, and European markets were heading higher after a nasty downturn over the summer. The price of crude oil was declining, but nothing like the sudden plunges that would come weeks later.
Here is a snapshot of key market signals and what they’ve shown over the last month and year to date.
S&P 500 INDEX
It’s been a bumpy ride for U.S. stocks in the last month, especially since Monday. The Standard & Poor’s 500 index nearly went into “correction” on Wednesday, meaning a decline of 10 per cent or more from a recent peak. The declines briefly wiped out the year-to-date gains for the index.
One month: Down 5.7 per cent.
Year-to-date: Up 2.1 per cent.
The U.S. Treasury market had one of its biggest moves in recent memory on Wednesday. The yield on the 10-year Treasury note dropped precipitously as prices on the notes surged. A rush to buy U.S. government debt, which is seen as extremely low-risk, can indicate investors are fearful of disruptions in other markets or expect the U.S. economy to slow down. In one morning the yield dropped from 2.20 per cent to as low as 1.91 per cent, a huge move that would normally take weeks. The magnitude and suddenness of the drop shocked investors, and left many puzzled over what caused it. By the end of the week trading had stabilized.
Friday: 2.20 per cent.
One month ago: 2.62 per cent.
Beginning of the year: 2.97 per cent.
The price of crude oil has had some steep drops in recent weeks, and has been in more or less steady decline since hitting a peak of $107.26 a barrel in June. On Friday it closed at $82.75 a barrel, 23 per cent below that peak. Ample global supplies, high production levels and expectations of slowing demand in China and in Europe as economic growth weakens have driven down the price of oil. While cheaper prices for oil and gas are good for drivers, airlines and many others, they mean trouble for energy company profits.
One month: Down 12.2 per cent.
Year-to-date: Down 15.7 per cent.
Troubling signs of a slowdown in Germany, Europe’s biggest economy, have rattled investors in recent weeks. Also, Germany’s resistance to using economic stimulus puts it at odds with the European Central Bank and its European neighbours. That contributed to a slide in European markets over the last month. The declines were even more pronounced in countries on the periphery of Europe, which have borne the brunt of the region’s long-simmering government debt problems, such as Greece and Portugal. Greece was especially hard hit by fears that its government could collapse, jeopardizing its exit from bailout loan programs. Greece’s long-term borrowing costs rose sharply, a signal that investors are more worried about its ability to pay its debts.
One month: Down 8.4 per cent.
Year-to-date: Down 7.3 per cent.
One month: Down 13.9 per cent.
Year-to-date: Down 23.1 per cent.
One month: Down 17.7 per cent.
Year-to-date: Down 19.9 per cent.
Yield on Greece’s 10-year bond
Friday: 7.93 per cent
One month ago: 5.77 per cent
Beginning of the year: 8.14 per cent.