Week 09 in Brief
North America
Stocks rallied Friday to send Wall Street to its best day in six weeks. Treasury yields eased from their recent highs and investors weighed the cumulative impact from Fed hikes already implemented and digested this week’s comments from the central bank.
The yield on the 10-year Treasury fell back to 3.96% from 4.06% late Thursday. It’s a respite from its shot higher over the last month as expectations rose for a firmer Fed.
How did the major indices perform?
On Friday:
- The Dow Jones Industrial Average rose 387.40 points, or 1.17%, to 33,390.97.
- The S&P 500 climbed 1.61% to 4,045.64,
- The Nasdaq Composite gained 1.97% to close at 11,689.01.
For the Week:
- The Dow added 1.2%, or 386 points,
- The S&P 500 gained 1.6%,
- The Nasdaq was up 2%.
What Drove the U.S. Market?
- Dallas Federal Reserve President Lorie Logan said on Friday the U.S. government bond market remains vulnerable to significant shocks that could cause broader damage, adding that government authorities must push ahead with efforts to shore up the financial system.
- There was a sense of hesitation in world markets on Friday about whether dramatic re-pricing of U.S. and European interest rate horizon over the past month was an overreaction and a New Year economic burst might prove to be a temporary situation.
- Investors searching for safer areas in the U.S. stock market are finding that traditional shelters that held up in last year’s selloff, such as consumer staples, utilities and healthcare, may be more problematic this time.
How Did the European Markets Perform?
- Stocks in the European Union and United Kingdom amounted to a seasonal record 685 terawatt hours (TWh) on March 1, and storage was almost 61% full, according to data from Gas Infrastructure Europe (GIE).
- The pan-European Stoxx 600 index was up 0.9% at market close, as auto stocks added 3.6% and mining stocks gained 2.2%. Oil and gas stocks were among the few sectors to post losses, down 0.4%.
- Across Europe, inflation data came in hotter than expected. A flash estimate for the euro zone showed headline inflation eased from 8.6% to 8.5%, but this was above a consensus estimate; while core inflation rose from 5.3% to 5.6%.
- Germany’s DAX gained 0.6%, France’s CAC 40 was up 0.4% and the U.K.’s FTSE 100 rose 0.23%
- European Central Bank President Christine Lagarde said Thursday that getting inflation to its 2% target will still take time and that the previously signaled 50 basis point hike in March is still on the cards, Reuters reported.
- The euro zone manufacturing PMI out this week showed a fall on the previous month, though S&P Global said it was pulled down by stocks of purchases and that production volumes across the bloc had broadly stabilized.
How did Asian Markets Perform
- Asia-Pacific markets closed high on Friday, with most indexes shooting up.
- Hong Kong - Hang Seng Index was up 0.5 percent at 20,525.29
- Shanghai - Composite was up 0.2 percent at 3,316.24.
- Japan’s Nikkei 225 Stock Index closed higher and hit a new 1-month high on a soft inflation reading from Japan’s capital city.
- Data on Friday showed Tokyo’s core consumer price index rose +3.3% y/y in February, a softer print from an over 40-year high of +4.3% y/y in January.
- Also, the Japanese Services PMI rose to 54.0 in February, above expectations of 53.6.
- The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 0.70% to 15.89.
Bonds and Commodities
- Brent crude futures rose $1.08, or 1.3%, to settle at $85.83 a barrel.
- U.S. West Texas Intermediate (WTI) crude futures settled at $79.68 a barrel, up by $1.52, or 1.9%.
- Both benchmarks posted their highest closing levels since Feb. 13.
- Oil prices rose, recovering from an early slump after news that the United Arab Emirates is not planning an exit from the Organization of Petroleum Exporting Countries (OPEC). U.S. crude rose 2% to $79.73 per barrel.
- Gold prices climbed to their highest in more than two weeks on Friday and were on track for their biggest weekly rise since mid-January, supported by a softer dollar as investors gauged the U.S. central bank’s policy path.
- Spot gold was up 0.5% at $1,844.60 an ounce after hitting its highest since Feb. 15. Prices have risen about 2% so far this week.
- U.S. gold futures rose 0.7% to $1,852.60.
Currencies
- The euro ticked up 0.33% on the day , while the U.S.
- Dollar slid from a 2-1/2-month high versus the Japanese yen on Friday, its largest weekly loss since mid-January against a basket of six major currencies.
- The dollar has been up about 7% over the last 12 months, and predicted a weaker greenback in a year amid an improving global economy and expectations the Fed will stop hiking interest rates well ahead of the ECB.
- The rupee on Friday settled at a one-month high level of 81.97 vs the US dollar.
- Bitcoin was down nearly 5% at around $22,381, its lowest price since Feb.
Next Week
Latest reports will be released in the coming week on the labor market, including the JOLTS report for January, ADP’s National Employment Report, and the February nonfarm payrolls report
Federal Reserve Chair Jerome Powell will testify before Congress on Tuesday and Wednesday as part of his semiannual Congressional testimony on monetary policy President Biden will outline his budget proposal for the upcoming fiscal year to Congress on Thursday. The new budget may contain higher taxes on billionaires and upper-income households earning over $400,000 a year.
Apple will hold its annual shareholders’ meeting virtually on Friday, where the company is expected to re-elect its board of directors, approve executive pay, vote on shareholder proposals, and more.