Week 24 in Brief
Global stocks rallied on Friday and closed near all-time highs, and oil and gold rose while the dollar dropped following strong but non-robust U.S. jobs data.
How did the major indices perform?
- In the US, the Dow Jones Industrial Average posted its worst weekly loss since October, as traders worried the Federal Reserve could start raising rates sooner than expected. The blue-chip average dropped 533.37 points, or 1.6%, to 33,290.08.
- The S&P 500 slid 1.3% to 4,166.45. Both the Dow and S&P 500 hit their session lows in the final minutes of trading and closed around those levels.
- The Nasdaq Composite closed 0.9% lower at 14,030.38.
- For the week, the 30-stock Dow lost 3.5%. The S&P 500 and Nasdaq were down by 1.9% and 0.2%, respectively, week to date.
What drove the market?
- A correction in the cyclical stock rally is underway as China’s economy slows, U.S. fiscal stimulus fades, and the Fed becomes more hawkish, according to a Bank of America Global Research report dated June 17.
- Federal Reserve Meeting: Growing expectations that the U.S. central bank will raise interest rates in 2023 has helped to pull equities down from record highs touched earlier this week by the S&P 500 and the Nasdaq Composite. St. Louis Federal Reserve President Bullard offered a fresh dose of hawkishness, saying Friday that he thinks the Fed should lift its benchmark interest rate as early as late 2022. In an interview on CNBC, Bullard said it was “natural” for the Fed to tilt hawkish at its meeting earlier this week, given recent strong inflation readings, but he also pointed to an economy that he views as recovering strongly from the pandemic.
- Economic Data: U.S. employers increased hiring in May and raised wages. But the nonfarm payroll increase of 559,000 jobs landed below the 650,000 forecasts of economists polled by Reuters. A stronger-than-expected jobs report would have heightened worries that the Fed might contemplate paring back its bond-buying program and raising interest rates.
- In other economic data, new orders for U.S.-made goods fell more than expected in April as a global semiconductor shortage weighed on the production of motor vehicles and electrical equipment, appliances, and components.
- Treasury’s Moves: The flattening of the U.S. Treasury yield curve also contributed to a sharp fall in bank stocks this week, with the S&P500 financial sector down 6.2. The Nasdaq Composite performed relatively better, however, as a fall in longer-term Treasury yields this week encouraged buying in technology and growth stocks whose valuations are sensitive to bond yields.
- Infrastructure Spending: In Washington, investors were watching the progress of proposed U.S. infrastructure spending. President Joe Biden rejected a new proposal from Republican Senator Shelley Moore Capito, the White House said. They were scheduled to meet on Monday.
Which stocks were in focus Friday?
- On Wall Street, Microsoft and Apple lifted the S&P 500; technology firms account for more than 5% of the MSCI’s all-country index’s weight. Shares for Amazon, Facebook, Alphabet’s Google, and Tesla were also up.
- So-called “meme stocks” continued their wild ride, with AMC Entertainment Holding shares little changed but on track to nearly double for the week.
- Sykes Enterprises Inc shares soared almost 30% after the company announced an agreement Friday to be acquired by Sitel Group in a cash deal for the customer experience management services valued at $2.2 billion.
- Moderna Inc. said Friday it remains committed to creating jobs in Massachusetts and will hire at least 155 more people for high-tech manufacturing roles this year. Shares closed 1.6% lower.
- Shares of Orphazyme A/S plummeted after the Denmark-based biopharmaceutical company said overnight that it received a “Complete Response Letter” (CRL) from the U.S. Food and Drug Administration regarding its treatment for Niemann-Pick disease type C (NPC). U.S. listed shares plunged almost 50% Friday.
- Shares of Curevac rose 7.1%. Shares of the German biotech have lost 22% this week after the company said a late-stage clinical trial of its COVID-19 vaccine was only 47% effective.
How did the European markets perform?
- European stocks retreated on Friday following hawkish comments from a Federal Reserve official which saw the STOXX 600 index snap a four-week winning streak as fears of U.S. policy tightening came to the fore.
- The pan-European Stoxx 600 provisionally ended 1.6% lower, with all sectors and major bourses in negative territory. Oil and gas stocks and Europe’s banking index lead losses, closing the session down roughly 3%.
- Mining stocks weighed on European shares on Friday, slipping e mining index slipped 0.1%, bringing total weekly declines to more than 5%.
- On the data front, May’s U.K. retail sales fell 1.4% month on month, official statistics revealed Friday, falling short of the 1.6% expansion expected by economists in a Reuters poll. The Office for National Statistics said food stores contributed most prominently to the surprise decline.
- Meanwhile, the German Producer Price Index (PPI) rose 1.5% month on month in May, vastly outstripping the 0.7% consensus forecast. On an annual basis, the PPI was 7.2% against a projection of 6.4%.
- In individual stocks, Danish pharmaceutical company Orphazyme sank 75.1% after saying it had failed to win support from the U.S. Food and Drug Administration for its arimoclomol drug, a treatment designed for genetic disorder Niemann-Pick disease type C.
- Dutch life insurer Aegon fell 5.5% fell toward the bottom of the Stoxx 600 while compatriot pharmacist Shop Apotheke Europe climbed nearly 5%.
How did Asian markets perform?
- Shares in Asia-Pacific were mixed on Friday as investors watched for market moves in the commodities sector after a recent tumble in prices was triggered by a strengthening of the U.S. dollar.
- The Shanghai Composite gained 1.14%, while the Nikkei 225 led the Hang Seng lower. They fell 2.07% and 0.27% respectively.
Commodities and other assets
- Benchmark 10-year U.S. notes last rose 20/32 in price to yield 1.5585%, from 1.627%, while eurozone bond yields edged lower as investors wondered about Fed policy.
- Oil rose, with Brent topping $72 a barrel for the first time since 2019 on as OPEC+ supply discipline and recovering demand.
- Spot gold added 1.1% to $1,890.65 an ounce after a 2% tumble on Thursday, its biggest since February.
- The dollar index, which tracks the greenback against six major currencies, was up 0.43% at 92.28, its highest since mid-April.
- That puts the index on pace for a weekly gain of nearly 2%, its best weekly jump in about 14 months.
- The euro was up 0.36% against the dollar at $1.2168.
- Sterling extended its fall against the U.S. dollar on Friday, dropping below $1.39, hurt by the Fed’s hawkish surprise and an unexpected fall in Britain’s retail sales.
- Bitcoin was down 7.0% at $35,451.09.
- Investors will parse public remarks from multiple Federal Reserve officials and earnings reports from Nike and FedEx.
- Watch out for our Monday Weekly Market Outlook that provides insights on what’s coming up that week.