Week 19 in Brief
- U.S stocks closed higher on Friday after a rally helped regain some of the losses experienced most of the week. Concerns over enduring inflation stirred volatility in trading sessions this week and almost sent the S&P 500 into bear market territory.
How did the major indices perform?
- The Dow Jones Industrial Average rose 466.36 points to 32,196.66, or 1.47%.
- The S&P 500 Index dropped 23.53 points, or 0.6%, to finish at 4,123.34.
- The Nasdaq Composite jumped 3.82% to 11,805.
- Despite Friday’s gains, the indices registered losses for the week, with the Dow down 2.14% and posting its first 7-week losing streak since 2001. The S&P 500 fell 2.4% and hit its longest weekly losing streak since 2011, while the Nasdaq slipped 2.8%.
What drove the US market?
- Volatility: Equity markets have slumping for months, led by the high-growth and arguably unprofitable tech stocks which started their downward trend late last year and spreading to even companies with healthy cash flows stocks in recent weeks. The decline has wiped much of the rapid gain’s stocks enjoyed off their pandemic lows in March 2020. The volatility in the stock market is in part linked to high inflation, and the Federal Reserve’s attempts to prevent further inflation by raising rates. But uncertainty remains on whether the US economy might end up in recession.
- Economic Data: Two major inflation reports was also responsible for market behavior this week. On Thursday, the Producer Price Index showed an 11% year-over-year rise in wholesale prices last month, with this rate moderating only slightly from March’s all-time high rate of 11.5%. Meanwhile, the Consumer Price Index showed a still-elevated 8.3% annual increase in prices paid by consumers last month. Analysts maintain that inflation remains a real issue for the broader market.
- Treasury yields: Long term Treasury yields spiked before pairing gains back this week, with the benchmark 10-year Treasury yield hovering around 2.9% Friday morning.
Which US stocks were in focus Friday?
- All the S&P 500 sectors closed higher Friday led by gains in consumer discretionary and information technology, which added 4.1% and 3.4%, respectively. Investors experienced a broad-based market comeback with about 95% of the S&P 500 ending the session in the green.
- Nike and Salesforce closed up 4.7% and 4.1%, leading the Dow higher while American Express and Boeing added more than 3% each, further pulling up the index.
- Notably, beaten-up tech stocks made a comeback with Meta Platforms and Alphabet adding 3.9% and 2.8%, respectively. Tesla jumped 5.7% while semiconductors Nvidia and AMD rose more than 9%.
- Apple rose 3.2%, steering itself out of bear market territory. Following strong gains on Thursday, heavily shorted meme stocks AMC Entertainment and GameStop jumped 5.5% and 9.9%, respectively.
- Meanwhile, Twitter shares plunged 9.7% after Elon Musk announced announced he was putting his acquisition of the company on hold as he awaits more details on the platform’s fake accounts. In other news, Robinhood popped 24.9% after crypto CEO Sam Bankman-Fried acquired a stake in the company.
How did the European markets perform?
- European stocks surged Friday trailing global stock rebound, to close a week that was dominated by losses caused by disappointing economic data. The pan-European Stoxx 600 added 2%, with travel and leisure stocks jumping 4.7% to lead gains as all sectors and major bourses finished in positive territory.
- Markets broadly fell on Thursday as investors remained concerned about slowing growth, interest rate hikes and red-hot April inflation data from the United States, which sparked concerns that a path of aggressive interest rate hiking lies ahead. Investors continued to monitor the geopolitical fallout from the war in Ukraine. Russia on Thursday threatened retaliation against Finland after Finnish leaders said the northern European nation must apply to join NATO “without delay.”
- Meanwhile, European leaders are racing to secure alternative gas suppliers after Moscow announced sanctions on European subsidiaries of its majority state-owned corporation Gazprom. The move came after Ukraine’s state-owned grid operator suspended Russian flows into Europe through a key entry point.
- Economic data this week showed French inflation experienced an annual rise of 5.4% in April. But Euro area industrial production fell 1.8% in March from the previous month, lower than the 1% analysts expected will be felt due to the impact of the war in Ukraine.
How did Asian markets perform?
- Asian markets finished broadly higher today with shares in Hong Kong leading the region. The Hang Seng is up 2.71% while Japan’s Nikkei 225 is up 2.64% and China’s Shanghai Composite is up 0.92%.
- Japanese-based and the world’s biggest tech investor Softbank reported that its Vision Funds had recorded a loss of 3.5 trillion yen ($27.5 billion) in the year ended March. That was a significant reversal from the unit’s performance from last year, when it had logged a healthy profit. SoftBank’s portfolio companies include South Korean e-commerce firm Coupang (CPNG) and Southeast Asian ride-hailing startup Grab (GRAB), which both went public in record-breaking offerings on Wall Street last year. All the companies have since slumped, with shares of each company dropping more than 60% since the start of the year.
Bonds and Commodities
- Oil prices rose about 4% on Friday as U.S. gasoline prices jumped to a record high, China looked ready to ease pandemic restrictions and investors worried supplies will tighten if the European Union bans Russian oil. Brent futures rose $4.10, or 3.8%, to settle at $111.55 a barrel. U.S. West Texas Intermediate (WTI) crude rose $4.36, or 4.1%, to settle at $110.49. That was the highest close for WTI since March 25 and its third straight weekly rise. Brent fell for the first time in three weeks and oil prices have been volatile, supported by worries a possible EU ban on Russian oil could tighten supplies but pressured by fears that a resurgent COVID-19 pandemic could cut global demand.
- The dollar dropped on Friday as a rally in equities contributed to a risk-on mood, but was set for a sixth straight week of gains. The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, fell 0.143% at 104.610 after earlier reaching 105.01, its highest since Dec. 2002. The U.S. currency is on track for its sixth straight week of gains, its longest weekly streak of the year and has climbed more than 9% for 2022. Meanwhile, the euro was up 0.18% to $1.0398, reversing course after dipping to 1.0348, its lowest since Jan 3, 2017.
- Bitcoin prices recovered to trade above $30,000 after setting the lowest level since Dec. 2020, as a cratering in prices of Luna further reverberated across the broader cryptocurrency market.
- Meanwhile, Tether, the world’s largest stablecoin, regained its peg to the dollar after more than $3 billion worth of tokens left the system in a single day. The cryptocurrency — which is meant to always be worth $1 — sunk as low as 95 cents on Thursday and struggled to climb back to its intended dollar peg. Tether now has a circulating supply of around $79.5 billion, down from $82.9 billion 24 hours earlier. suggesting the company behind it processed over $3 billion in redemptions in just one day.
The earnings season continues with major retailers - Walmart, Target, Home Depot, and Lowe’s – expected to report earnings next week. Investors will also parse economic data from around the world, including key inflation updates for Canada, the U.K., and Eurozone.