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Daily Index Insights

U.S. Equities Market Attributes July 2024

iBoxx Tadawul SAR Government Sukuk Indices – Q2 2024

iBoxx USD Emerging Markets Monthly Commentary: June 2024

iBoxx USD Asia Ex-Japan Monthly Commentary: June 2024

Daily Index Insights

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Benedek Vörös

Director, Index Investment Strategy

S&P Dow Jones Indices

“Cannon to right of them, 
Cannon to left of them, 
Cannon in front of them 
Volley'd and thunder'd;” 

Alfred Tennyson (August 6, 1809 – October 6, 1892), “The Charge of the Light Brigade” 

It looks like markets around the world are having a Turnaround Tuesday after yesterday’s capitulation: the S&P/Topix 150 closed up 9.3% in Japan, the Japanese yen has stabilized against the USD and other currencies, and U.S. yields are 6-8 basis points higher and S&P 500 index futures indicate a gain of ~1% for the U.S. bellwether at the open.  Let’s hope it lasts!  Here is your daily dashboard.

  • Although U.S. equities staged a vigorous recovery from their intra-day lows, the S&P 500® still closed the day down 3.0%, the worst day since September 2022.  No segment was spared from the sell-off: even Industrials, which held up best, dropped 1.7%, while worst-hit Information Technology fell 3.8% on the day.   Last Week Leaders & Laggards: S&P 500 Sectors & Factors
  • From its all-time high on July 16th to its closing value yesterday, the S&P 500® has now declined by 8.5%.  Tech has done worse, but smokes, booze, food and weapons could have provided shelter: the S&P Composite 1500® industry indices for Tobacco, Beverages, Food Products, and Aerospace & Defense are up by 5.6%, 4.2%, 2.5% and 0.8%, respectively, over the same period.  Defensive factors including S&P 500 Low Volatility High Dividend and S&P 500 Low Volatility also held up well, and S&P 500 Equal Weight also limited its losses to just 5.1%, outperforming its capitalization-weighted peer by 3.3%.  Information Technology and High Beta were down 14.6% and 13.4%, respectively. 
    Last Week Leaders & Laggards: S&P 500 Sectors & Factors
  • At the sector level, Equal Weight performed best in S&P 500 sectors that were hurt the most during the recent market sell-off: Equal Weight Communication Services, Consumer Discretionary and Information Technology had excess returns of 4.3%, 3.0% and 1.7%, respectively vs. their capitalization-weighted versions.  In the Energy space, on the other hand, larger firms did relatively better. 
    Last Week Leaders & Laggards: S&P 500 Sectors & Factors
  • Despite our caution yesterday that the high VIX® indicates insurance is relatively expensive, many market participants appear to be purchasing protection nonetheless.  Yesterday brought an all-time record high for trading volume in S&P 500 index put options; more than 3 million contracts changed hands.   
    Last Week Leaders & Laggards: S&P 500 Sectors & Factors

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U.S. Equities Market Attributes July 2024

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Howard Silverblatt

Senior Index Analyst, Product Management

S&P Dow Jones Indices

Key Highlights

Index Returns - U.S. Equities July 2024: Exhibit 1

Market Snapshot

The first half of July continued the 2024 gains and new closing highs (7 in July and 38 YTD); the last closing high (of 5,677.20; intraday high of 5,669,67) was on July 16, when the S&P 500 was up 3.79% month-to-date and up 18.90% YTD.  However, starting on July 17, 2024, the perception and economics changed, with reallocation to small caps from large caps, especially in Information Technology (including the Magnificent 7).  The index then declined 4.72%, putting it into the red month-to-date (-1.12%), as some buying and bottom-fishing came in to lift the market.  The S&P 500 posted a strong 1.58% gain on the last day of the month, helped by expectations of the U.S. Fed decreasing interest rates at its next meeting, resulting in the index posting a gain of 1.13% for July (1.22% with dividends), as it avoided a second monthly decline for 2024 (April was -4.16% and -4.08% with dividends); June was up 3.47% (3.59%) and May added 4.80% (4.96%).  For the three-month period, the S&P 500 posted a gain of 9.66% (10.05%), with the YTD return up 15.78% (16.70%), which annualizes to a 28.26% (29.99%) rate; breadth improved to 364 issues up and 139 down (June YTD was 301 up and 200 down).  July posted gains for 14 of its 22 trading days (12 of 19 last month; 82 of 146 YTD).  Of the 11 sectors, 9 were up (5 up last month), as trading decreased 10% (adjusted for days) over June and was down 4% over July 2023.

The S&P 500’s market value increased USD 0.536 trillion for the month (up USD 1.546 trillion last month) to USD 46.379 trillion and was up USD 6.340 trillion YTD; it was up USD 7.906 trillion for 2023 and down USD 8.224 trillion in 2022.

The Dow Jones Industrial Average set three new closing highs in July (22 YTD; 41,198.08 closing high and 41,221.98 intraday high), as it closed above 40,000 and 41,000 for the first time.  The index’s decline from its highs was limited, helped by being a price-weighted index with limited weight in the Magnificent 7.  It closed at 40,842.79, up 4.41% (4.51% with dividends) from last month’s close of 39,118.86, when it was up 1.12% (1.23%) from the prior month’s close of 38,686.32 (2.30%, 2.58%).  For the three-month period, The Dow® was up 8.00% (8.53%), as the YTD period was up 8.37% (9.52%).  The one-year return was 14.86% (17.22%), 2023 was up 13.70% (16.18%) and 2022 posted an 8.78% decline (-6.86%).

Donald Trump became the official Republican candidate for president at the Republican convention (July 15-18).  Polls at the time had shown Donald Trump's lead was increasing, and the Street had started to take positions based on a second Trump administration.  On July 13, 2024, Trump survived an assassination attempt with minor injuries.  At the start of July, President Joe Biden continued to address his poor presidential debate performance on June 27 (the second debate is scheduled for Sept. 10), ahead of the Democratic convention on Aug. 19-22.  He was diagnosed with COVID-19 and was facing calls for him to leave the presidential race, as he recovered and returned to work.  On July 21, 2024, President Joe Biden said he would not run for re-election, choosing instead to endorse his vice president, Kamala Harris, to be the Democratic candidate.

The Fed minutes from its June 11-12, 2024, meeting showed the members saw that upward price pressure was diminishing, but the group favored a wait-and-see approach before taking any action.  Fed Chair Jerome Powell testified before Congress (a semiannual requirement) and indicated that interest rate cuts were coming, but gave no indication of the timeline, as he remarked that there are other risks to the economy (and responsibilities of the Fed), referring to employment.  The Fed Beige Book showed slowing growth and a loosening labor market, as inflation was declining and the Street saw it as supporting evidence for a September interest rate cut by the Fed.

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iBoxx Tadawul SAR Government Sukuk Indices – Q2 2024

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Jessica Tan

Principal, Fixed Income Indices

S&P Dow Jones Indices

iBoxx Tadawul SAR Government Sukuk Index

Following Q1’s -1.89% return, the iBoxx Tadawul SAR Government Sukuk Index began Q2 down 1.52% in April, inching closer toward the lows of October 2022 before recouping its losses with two consecutive months of gains (up 0.75% in May and 1.43% in June).  The index closed Q2 up 0.65%, bringing its YTD return to -1.26%.

iBoxx Tadawul SAR Government Sukuk Indices: Exhibit 1

iBoxx Tadawul SAR Government Sukuk Indices: Exhibit 2

In Q2, the 10+ year segment, which is the most sensitive to interest rate changes, performed the best at 0.82%, followed by the 0-5 year segment (up 0.60%) and the 5-10 year segment (up 0.59%).  On a YTD basis, the 10+ year segment was still in the red (down 3.56%) due to its lackluster performance in Q1.  Year-to-date, the 0-5 year sleeve was the only segment in the black, up 0.76%, while the 5-10 year segment was down 0.84%.

iBoxx Tadawul SAR Government Sukuk Indices: Exhibit 3

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iBoxx USD Emerging Markets Monthly Commentary: June 2024

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Catalina Zota

Associate Director, Fixed Income Product Management

S&P Dow Jones Indices

June 2024 Commentary

Market Overview

In June, at the half-year mark, U.S. Treasury yields ended higher than where they started at the beginning of 2024: the 2-year was at 4.71%, the 5-year was at 4.33%, the 10-year was at 4.36% and the 30-year was at 4.51%.  Compared to Jan. 2, 2024, this constitutes an average increase of 40 bps across the tenors.  In contrast to curve inversion—which historically has predicted a recession—the increase in Treasury yields usually reflects positive investor sentiment and higher mortgage rates influencing the bond market.  At its last meeting in June, the U.S. FOMC decided to keep the federal funds rate unchanged, citing easing but little-changed conditions since March and hinting at one rate cut later in the year.  The CPI was unchanged in May after rising 0.3% in April.  For the 12-month period, inflation stood at 3.3%. The BLS report in June stated that the U.S. unemployment rate was 4.0%, little changed in May.

The overnight repo rate, a measure of market liquidity, ranged between 5.28%-5.47%, in line with May.  On the equities front, the S&P 500® was up 3.47% in June, led by Information Technology, Consumer Discretionary and Communication Services.

Latin America continued its turbulent year.  Banco Central do Brasil kept the Selic interest rate at 10.5%, quoting increasing household consumption, resilient economic activity and inflation not decelerating in line with the committee’s expectations.  In Argentina, President Milei’s economic reforms passed the senate after his vice president cast the final vote.  The reforms are a pared-down version of his original radical economic transition and still have to pass the house of deputies.  Another win for Milei was China’s extension of a CNY 35 billion (USD 5 billion) currency swap line until July 2026, giving the economy more room for reform and growth.

In Europe, the Eurostat report released on July 2, 2024, stated that eurozone inflation was at 2.5% in June, down from 2.6% in May.  In India, the HSBC India Manufacturing PMI  rose to 58.3 in June from 57.5 in May, five points above its long-run average.  The increase was influenced by new orders, output and buying levels with favorable business conditions.

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iBoxx USD Asia Ex-Japan Monthly Commentary: June 2024

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Jessica Tan

Principal, Fixed Income Indices

S&P Dow Jones Indices

Featuring iBoxx USD Asia-Pacific

June 2024 Commentary

Divergence in global interest rate policies continued in June as central banks such as the European Central Bank, Bank of Canada and Swiss National Bank cut interest rates by 25 bps.  On the other hand, many countries (such as the U.S. and Australia) still wrangled with stubborn inflation levels, and their central banks held existing rates steady.  In Asia, most central banks left their interest rates unchanged, and most Asian currencies have depreciated against the U.S. dollar during the first half of the year.  One exception was the Hong Kong dollar, which is pegged to the U.S. dollar and flipped the trend of three continuous months of weakening in Q1 with three consecutive months of appreciation against the U.S. dollar in Q2.

In the U.S., the S&P 500® continued to break records as it closed June and Q2 with gains of 3.47% and 3.92%, respectively, bringing its YTD return to 14.48%.  10-year U.S. Treasuries yields—as represented by the iBoxx USD Treasuries Current 10 Year—dropped by 29 bps to 4.26% before climbing in the last week to end the month at 4.42%.  Since the start of the year, the 10-year U.S. Treasury yield has gained 50 bps and remained above 4%.

Faced with a weakening currency and challenging economy, the People’s Bank of China (PBoC) opted to keep its benchmark lending rates unchanged.  Chinese-issued U.S. dollar bonds—as represented by the iBoxx USD Asia ex-Japan China—returned 0.70%, while Chinese stocks—as represented by the S&P China 500 (USD)—retreated by 3.01%; this brings their Q2 2024 returns to 1.66% and 0.75%, respectively.

iBoxx USD Asia Ex-Japan Monthly Commentary: Exhibit 1

The Asian U.S. dollar bond market ended the month with a 0.82% gain, supported by a 1.31% rise in the high yield segment and a 0.74% rise in investment grade bonds.  The overall market gained 1.21% in Q2 and 2.40% on a YTD basis.  The China Real Estate segment, which was the worst-performing segment in 2023 (down 1.71%), has become the best-performing segment YTD in 2024 (up 11.81%).

All rating and maturity segments rallied this month, with the exception of the CCC 7-10 Year and 10+ Year high yield buckets, which were dragged down by negative returns from Pakistan bonds.  Since the start of the year, the high yield segment has been favored by investors (up 9.72%) and has outperformed the investment grade segment (up 1.35%) on a YTD basis.

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