Week 17 in Brief
- U.S stocks tumbled on Friday, with the Nasdaq booking its worst month since 2008, dragged down by mixed earnings from tech companies, including disappointing quarterly results from Amazon and a warning on rising costs from Apple Inc.
- Investors weighed fresh inflation data, the Federal Reserve’s monetary tightening, rising rates, Covid case spikes in China and the ongoing war in Ukraine.
How did the major indices perform?
- The Dow Jones Industrial Average dropped 939.18 points, or 2.8%, to close at 32,977.21.
- The S&P 500 Index dropped 155.57 points, or 3.6%, to finish at 4,131.93, re-entering correction territory.
- The Nasdaq Composite shed 536.89 points, or 4.2%, to end at 12,334.64.
- For the week, the Dow dropped 2.5%, the S&P 500 slumped 3.3% and the tech-laden Nasdaq lost 3.9%. In April, the Dow fell 4.9%, the S&P 500 tumbled 8.8% and the Nasdaq plunged 13.3%.
What drove the US market?
- Disappointing Quarterly earnings reports: Stocks slumped following dismal first-quarter reports, with technology shares weighing on indexes. Shares of e-commerce giant Amazon.com dragged down the benchmarks after the company reported its first quarterly loss in seven years. Amazon shares closed down about 14% Friday, making it the second biggest loser in the S&P 500 index after VeriSign Inc. plunged 14.3%.
- Friday wrapped up one of the busiest weeks for the first-quarter earnings season and a particularly intense one for tech companies, which drove investor sentiment throughout the week. About 80% of S&P 500 companies have beat quarterly earnings expectations, with roughly half of the index’s members reporting results.
- Uncertainty & Volatility: The month of April was consumed by worries on several fronts, including economic growth in China, where COVID-19 cases are forcing lockdowns in several cities and supply chain disruptions caused by Russia’s war in Ukraine. The CBOE Volatility Index traded around 33 on Friday afternoon, well above the 200-day moving average of about 21.5.
- Economic data: Data released on Thursday showed the US had a weak first quarter. The Federal Reserve’s favoured inflation gauge — the core personal consumer expenditure price index for March — rose 0.3%, with the headline index up 0.9%. Meanwhile, headline inflation rate climbed 6.6% over the 12 months ending March, up from 6.4% in February – the steepest increase since 1981. The core inflation rate over the past 12 months slipped to 5.2%, from 5.3%, marking the first month-to-month decline in more than a year.
- In April, the University of Michigan’s final reading of U.S. consumer sentiment slipped to 65.2 from an initial reading of 65.7, but still marked the first rise so far this year.
Which US stocks were in focus Friday?
- Technology stocks have been the epicentre of the April sell-off as high-interest rates hurt valuations, and supply chain issues stemming from Covid and the war in Ukraine disrupt business.
- Tesla Inc. shares declined 0.8%. CEO Elon Musk tweeted late Thursday that he has no plans to sell more stock. Fillings with the Securities and Exchange Commission showed Musk sold nearly $4 billion in Tesla stock amid his $44 billion deal for Twitter.
- Apple shares fell about 3.7% after management said supply chain constraints could hinder fiscal third-quarter revenue. Meanwhile, Intel Corp. shares dropped 6.9%, after the chipmaker stuck to its full-year outlook amid expected weakness this quarter.
- Roku Inc. shares rose 1.4%, after the digital media maker reported forecast-beating fiscal first-quarter revenue and earnings largely in line with projections.
- Robinhood Markets Inc. shares fell 2.8% after the brokerage missed first-quarter forecasts and said fewer people were trading on its online platform.
- Colgate-Palmolive Co. shares dropped 5.1% after the consumer goods maker said a challenging cost environment continues to weigh on profit.
- Chevron Corp. shares fell 3.2% after revenues surged past expectations on the rise in oil and gas prices, but a rise in profit came in short of expectations. Exxon Mobil Corp. XOM missed profit estimates for the first quarter as it booked a $3.4 billion charge relating to its planned exit from Russia’s Sakhalin-1 project. Exxon shares slid 2.2%.
How did the European markets perform?
- European markets closed higher Friday boosted by strong corporate earnings, but remained down 0.6% for the week and dropped 1.2% in April.
- The pan-European Stoxx 600 index closed up 0.7% provisionally, with basic resources climbing 2.6% to lead gains as most sectors and major bourses ended in positive territory. London’s FTSE 100 advanced 0.5% Friday for a weekly gain of 0.3% and a gain of 0.4% for the month.
- Economic data showed eurozone inflation hit a record high for the sixth consecutive month in April, notching an annual 7.5% following March’s 7.4% figure and sparking further questions about how the European Central Bank will react. Meanwhile, Euro zone GDP grew 0.2% in the first quarter and 5% year-on-year as the war in Ukraine curtailed economic growth across the bloc, official estimates revealed on Friday.
- In individual stocks, Johnson Matthey soared nearly 19% to lead the Stoxx 600 after Standard Investments, the investment arm of U.S. industrial firm Standard Industries, took a 5.23% stake in the British chemicals company. At the bottom of the index, BE Semiconductor shares fell over 9% after its first-quarter earnings report.
- Investors continued to monitor the war in Ukraine and its geopolitical implications, after Russian President Vladimir Putin warned the West of a “lightning fast” response to countries that intervene in the war. Russia also shocked the European community by halting gas supplies to Poland and Bulgaria on Wednesday because after the two refused to pay for the gas in Russian rubles, as Moscow demanded.
How did Asian markets perform?
- The Shanghai Composite closed 2.4% higher Friday but still fell 1.3% for the week and shed 6.3% in April. Hong Kong’s Hang Seng Index jumped 4% Friday for a weekly gain of 2.2%, but booked a 4.1% drop in April. Japan’s Nikkei 225 was closed for a national holiday on Friday, but the index is down 0.9% for the week and dropped 3.5% this month.
Bonds and Commodities
- The yield on the 10-year Treasury note rose 2.3 basis points Friday to 2.885%, following the latest inflation data. Yields and debt prices move opposite each other. The 10-year yield climbed 56.1 basis points in April, the largest monthly gain since December 2009 based on 3 pm Eastern Times levels.
- Oil prices fell on Friday, reversing late in the volatile session, pulled downward by the U.S. heating oil contract that plummeted by more than 20% at one point on the day of its expiration. U.S. crude oil futures settled at $104.69 down 67 cents or 0.64%. Brent crude futures settled at $109.34, up $1.7 or 1.63%.
- Gold gave up some gains after earlier rallying as much as 1.3% when the dollar retreated, and the precious metal was set to end the month lower on bets of aggressive Fed policy tightening. Spot gold was last up 0.1% to $1,895.86 an ounce.
- The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, fell 0.4% following headline inflation data. The euro was up 0.47% to $1.0543 against the dollar while the Japanese yen strengthened 0.80% at 129.82 per dollar.
- Bitcoin was down 3.8% at $38,410.
Investors will monitor the Fed’s policy meeting, April jobs report in the US and a flurry of corporate earnings from firms including Pfizer, Starbucks, Uber, Airbnb, DoorDash and others.