Analytics, 09 April 2022
Week 14 in Brief
North America
U.S stocks finished lower on Friday, as investors reacted to comments about tighter monetary policy from the Federal Reserve.
How did the major indices perform?
- The Dow Jones Industrial Average 137.55 points, or 0.4%, to 34,721.12,
- The S&P 500 Index dipped 0.27% to 4,488.28.
- The Nasdaq Composite fell 1.34% to 13,711.00.
- All major averages declined for the week, with the S&P 500 closing down 1.27% and Nasdaq 3.86%. The Dow dipped 0.28% week-to-date, hitting back-to-back weekly declines.
What drove the US market?
- Federal Reserve comments: Markets reacted to uncertainty about Federal Reserve policy and the impacts of the continuing war in Ukraine, all of which weighed down on stocks and triggered a selloff in the bond market. Minutes of the Federal Reserve indicate that monetary policymakers considered raising interest rates and unwinding its balance sheet faster, driving stocks lower. The tone signalled the Federal Reserve’s plan to act even more aggressively to fight inflation.
- Treasury Yields: A quick jump in bond yields has led some investors and analysts to question whether the rise in yields will chip away at stock returns and at what point investors will opt to ditch stocks in favour of bonds. The benchmark 10-year Treasury note yield rose for a sixth consecutive day to 2.713%, the highest level since March 2019. Yields rise when prices fall. Shorter-dated bond yields also advanced, with the two-year yield rising to 2.518% and notching a fifth consecutive week of gains. The two-year yield recorded its biggest five-week yield gain since May 1987.
- Geopolitics: Investors remain worried about the war in Ukraine. A new round of sanctions has been instituted against Russia following allegations of war crimes by Russian troops against civilians. On Thursday, the United Nations General Assembly voted to suspend Russia from its Human Rights Council.
- Volatility: Investors have also had to analyze mixed signals stemming from different market parts. For example, the bond market recently flashed an indication that a recession may be on the horizon. And transportation stocks, which are often viewed as an indicator of the economy’s health, have been tumbling.
Which US stocks were in focus Friday?
- This week, the healthcare and consumer staples sectors rallied as investors worried about a slowing economy pivoted toward stocks with stable earnings.
- Investors dumped tech stocks considered riskier in anticipation of higher interest rates limiting the group’s future profit growth. Chipmakers like Nvidia and Micron have struggled amid supply chain shortages and concerns of a looming recession, dipping 4.5% and 1.4%, respectively. At the same time, shares of Tesla, Alphabet, and Apple slid 3%, 1.9%, and 1.2% lower.
- Tesla shares rose after CEO Elon Musk Thursday night committed to 2023 deliveries of the Cybertruck pickup and Tesla Semi during an event at the company’s Texas “gigafactory,” reports said. Shares were down 2.2%.
- Robinhood shares dipped about 7% after Goldman Sachs downgraded the app from neutral to sell.
- UPS fell close to 1% on the back of a downgrade from Bank of America, citing concerns about weakening demand and declining prices in the industry.
- Financials like JPMorgan Chase and American Express rebounded, giving up some of the week’s earlier losses.
How did the European markets perform?
- European markets closed higher Friday to end a volatile trading week as investors assessed the pace of the Federal Reserve’s monetary tightening plans and news from Ukraine.
- The pan-European Stoxx 600 index provisionally closed up by 1.2%, with oil and gas shares adding 3.2% to lead the gains as almost all sectors and major bourses entered positive territory.
- In London, the FTSE 100 was up 1.56%, Germany’s DAX was 1.46%, and France’s CAC 40 was 1.34%.
- The German e-commerce company Scout24 soared around 14% in individual stocks after a media report about a possible takeover bid. At the bottom of the benchmark, Malta-based online gambling firm Kindred Group sank more than 13% after reporting a 30% drop in first-quarter revenue. The company cited the impacts of its decision to cease activity in the Netherlands temporarily.
How did Asian markets perform?
Asian markets closed higher, with the Shanghai Composite Index up 0.5%, while Hong Kong’s Hang Seng Index rose 0.3%. Japan’s Nikkei 225 ticked up 0.4%.
Commodities
- Oil prices rose slightly on Friday. With US WTI crude up 2.32% to settle at $98.26, Brent crude gained 2.19% and settled at $102.78.
- Gold prices on the international market have remained stable at around $60 a gram, or $1,900 an ounce.
Currencies
- The US dollar rose as high as 99.904, its best level since May 2020. The index is up 1.2% this week, which would be its most significant advance in one month, backed by hawkish remarks from several Federal Reserve policymakers calling for a faster pace of interest rate increases to curb rapid inflation.
- Meanwhile, the ruble strengthened 1% against the dollar, trading at around 77 rubles to $1. The Russian central bank cut its key policy rate on Friday to 17% from 20%, signifying efforts to stabilize the country’s financial system are having an effect. Russian stocks declined by 2.5%.
- The euro fell to a new one-month low of $1.0856 in early trade on Friday, while the Sterling was at the low end of its recent range at $1.30695.
- Bitcoin was trading around $43,300, just off its overnight two-week low of $42,742.
Next Week
- The earnings season kicks off, and Investors will parse earnings from big banks, including JPMorgan, Citigroup, Goldman Sachs, Morgan Stanley & Wells Fargo.
- Delta Airlines, UnitedHealth, and TSMC will also report earnings.