Markets rallied for the week, reversing direction from last week’s drop, despite a fall-off on Friday. Friday’s decline was due to a disappointing reading of the Q2 Employment Cost Index (ECI), which was up only 0.2% versus expectations for a 0.6% increase. Federal Reserve Chair Janet Yellen had recently cited the ECI as a sign of a tightening labor market. Treasuries rallied on the news, while the dollar came under pressure. Volatility persisted in Chinese equity markets, with the Shanghai exchange shedding 8.5% on Monday alone.
Markets were unable to maintain the prior week’s momentum as some high-profile earnings misses combined with global growth worries to put investors in a cautious mood. The S&P 500 and Nasdaq posted their worst weeks since March, while the DJIA had its worst since January. Gold hit a new five-year low, while crude oil is down more than 20% from June highs.
Markets breathed a sigh of relief as progress was made toward a deal that would keep Greece in the euro zone. The Nasdaq delivered its best week since October while hitting a new all-time intraday high, and the S&P 500 had its strongest performance in four months to close in on a new high of its own.
News out of Greece continued to dominate market sentiment, resulting in a volatile but mostly positive week for equities. The CBOE Volatility Index spiked to its highest levels since January before pulling back, while yield on the benchmark ten-year U.S. Treasury rose sharply to close the week after cratering on Wednesday. Looking abroad, Chinese stocks delivered their first positive week since the mid-June beginning of a selloff that slashed indexes by 30% or more.
It was another choppy — if abbreviated — week for equity markets, which ended mostly down. The S&P 500 delivered its biggest weekly loss in three months, unable to rebound from Monday’s Greece-inspired selloff. Yield on the benchmark ten-year U.S. Treasury pulled back from recent highs as investors sought safe havens in advance of Sunday’s Greek referendum.