Week 07 in Brief
North America
U.S. stocks were mixed on Friday as stubbornly high inflation and a possible rebound in rates continued to weigh on investor sentiment. There was a continued worry about how the economy and equities will hold up as the Federal Reserve hikes rates to tame stubbornly high inflation.
One of the few best-performing stocks this week, Paramount Global has gained about 9% through Friday’s open. The stock got a boost this week, with its price going up nearly 40% for 2023.
How did the Major Indices Perform?
On Friday:
- The Dow Jones Industrial Average rose 0.39%.
- The S&P 500 fell by 0.28%.
- The Nasdaq Composite dropped 0.58%
For the Week:
- The Dow ended the week down 0.13%.
- The S&P 500 lost 0.27%
- The Nasdaq Composite lost 0.59%.
What Drove the U.S. Market?
- Goldman Sachs and Bank of America said they expect the U.S. Federal Reserve to raise interest rates three more times this year, lifting their estimates after data pointed to persistent inflation and a resilient labor market.
- Producer prices accelerated in January by the biggest margin in seven months, according to data on Thursday, while a Labor Department report showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.
- Before the recent U.S. data, J.P. Morgan had forecast the terminal rate at 5.1% by the end of June. A majority of economists polled by Reuters before the latest data said they expected the Fed to raise rates at least twice more in the coming months, with the risk of them going higher still. None of them are expecting a rate cut this year.
- Traders have raised their bets on how far they see the Fed hiking in recent sessions and are now pricing in a peak at around 5.3% in September.
How Did the European Markets Perform?
- European markets closed slightly lower on Friday, as investors continue to assess the impact of inflation and production data from the U.S. and U.K., alongside company earnings.
- The pan-European Stoxx 600 index provisionally ended the session down 0.2%, trimming losses from earlier in the day. Oil and gas stocks led losses with a 1.9% drop, followed by tech, which was down 1.6%.
- Markets were upbeat through the morning, as France’s CAC 40 index hit an all-time intraday high. However, they traded in the red through most of the afternoon after U.S. stocks opened lower.
- Banks slipped 0.6%. The worst-performing stock in this category was NatWest down 6.7% after the British bank issued a note of caution on future profits.
- Sectors including telecoms and utilities traded higher.
- Germany’s DAX was up 0.9%, while France’s CAC 40 and U.K.’s FTSE 100 were both up 0.18%.
How did Asian Markets Perform
- China and Hong Kong stocks fell on Friday, dragged by some tech stocks. Upbeat U.S. economic data revived market concerns that China’s central bank might delay more easing measures to support the pandemic-hit economy.
- China’s blue-chip Index closed 1.44% lower, while the Shanghai Composite Index lost 0.77%. For the week, the two indexes lost 1.7% and 1.1%, respectively.
- Hong Kong benchmark Hang Seng was down 1.28% and fell 2.2% for the week.
- Bursa Malaysia finished lower on Friday without market-moving factors while the ringgit led losses among its peers.
- Elsewhere in the region, Japan’s Nikkei 225 fell 0.66%, South Korea’s Kospi lost 0.98%, China’s Shanghai Composite Index eased 0.77% and Hong Kong’s Hang Seng Index closed down 1.28%.
- The ringgit was quoted at 4.4313 against the greenback, depreciating 0.62% at 5 pm.
- The FBM KLCI closed down 7.36 points, or 0.5% at 1,476.90. For the week, the index gained 2.3 points or 0.16%.
Bonds and Commodities
- U.S. Treasury yields eased a bit on Friday after the 10-year yield earlier hit a three-month high, as the market placed greater odds that the Federal would keep interest rates higher for longer in its fight against persistent inflation.
- Benchmark 10-year notes were down 3 basis points to 3.813%, from 3.843% late on Thursday. The 2-year note was last down 0.2 basis points to yield 4.6169%.
- U.S. crude settled down 2.74% at $76.34 per barrel and Brent finished at $83.00, down 2.51% on the day.
- Gold prices were up slightly for the day but down for the week due to a stronger dollar and rising bond yields.
- Spot gold added 0.2% to $1,841.94 an ounce. U.S. gold futures gained 0.01% to $1,842.20 an ounce.
Currencies
- Bitcoin last rose 4.95% to $24,685.00, below Thursday’s session peak of $25,270. Thursday’s session high was bitcoin’s highest since June 2022, but the cryptocurrency retreated and closed Thursday’s session down 3.5%.
- The dollar index, which measures the U.S. currency against a basket of major currencies, earlier hit a six-week high as traders ramped up bets for Fed rate hikes.
- However, the greenback lost ground as the session wore on with the euro up 0.23% to $1.0693.
- The Japanese yen weakened 0.16% versus the greenback at 134.16 per dollar, while the Sterling was last trading at $1.2044, up 0.43% on the day.
Next Week
The week to come will be a short one, with U.S. markets closed on Monday. Earnings season continues with reports from major retailers including Walmart and Home Depot. Other prominent companies reporting next week include Nvidia, Alibaba, Coinbase, and Moderna, among others. We’ll receive updates on the housing market next week, including new and existing home sales for January.
On Wednesday, the Federal Reserve will release meeting minutes from the latest FOMC meeting.
On Friday, we’ll get a key update on inflation with the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation.