Week 26 in Brief
North America
U.S. stocks couldn’t maintain their positive momentum from the previous week’s rally, as the major U.S. indexes fell around 1% to 4%. For the S&P 500 and the NASDAQ, it was the 11th negative weekly result out of the past 13.
For the week, all three major market indexes posted losses, with the Dow Jones average edging 1.3% lower, the S&P sank 2.2%, and the Nasdaq fell 4.1%.
The sectors that have relatively outperformed this week and generally this year, aside from energy, have been defensive parts of the market: utilities, consumer staples, and health care. These sectors are considered immune to recessions and bear markets, and from this S&P 500 chat from FactSet for the first half of the year, they are seen to outperform all other sectors.
How did the major indices perform?
Friday saw an upturn for most stocks, but all major indices recorded weekly losses. On Friday, The S&P 500 rose 1.1% after having been down 0.9% in the early going. The gain snapped a four-day losing streak for the benchmark index, which still posted its fourth losing week in the last five. The Dow Jones Industrial Average rose 1%, while the tech-heavy Nasdaq gained 0.9% after a sell-off in technology stocks eased. Here’s how the major US indices closed the week:
What drove the U.S. market?
- Micron Technology (MU) reported earnings after the bell on Thursday, providing clues to the latest happenings in the chip industry. However, things don’t look any better than a few months ago, with the memory maker publishing mixed FQ3 results and issuing guidance that was well below consensus forecasts. Revenue of $6.8B-$7.6B is expected in the coming quarter, compared to analyst estimates of $9.05B, prompting shares of Micron to slide 5% in extended trading.
- A constructive start to the week in the investment-grade corporate bond market spurred primary issuance, and this uptick in supply pushed the market lower. This trend was exacerbated by mixed macroeconomic sentiment, as market participants weighed Fed Chair Jerome Powell’s mid-week remarks, in which he reinforced the Fed’s commitment to bringing inflation lower, against the lower-than-expected core PCE inflation reading.
- Things looked pretty shaky in the crypto-verse as a continuous flow of damaging headlines continued to rock the sector. The staunch believers are calling it a “crypto winter” before things heat up again, while the naysayers are pointing to the final demise of “tulip mania” they have been warning about for years.
How did the European markets perform?
- European markets closed mixed Friday after suffering their worst quarter since the onset of the Covid-19 pandemic, as inflation and interest rate hikes continue to weigh on sentiment.
- The pan-European Stoxx 600 index closed the second quarter of the year on Thursday down 9% — the worst three-month period since the early stages of the pandemic in 2020 — and was down 16.6% year-to-date.
- Eurozone inflation soared to a record high of 8.6% year-on-year in June, according to a first official estimate published Friday, as the war in Ukraine continued to drive up food and energy prices.
- Dutch chipmaker ASMI was the worst performer during Friday deals, shedding 9% to lead a broad decline for semiconductor stocks.
- The biggest climber was Swedish real estate company SBB, which gained more than 9% after publishing a 2021 cash flow statement.
- Russia defaulted on its foreign debt for the first time since the Bolshevik Revolution after a 30-day grace period to disburse two Eurobond interest payments expired. It was a largely symbolic move given that the Kremlin has enough money to pay off the debt, but is barred from doing so because of the heavy Western sanctions leveled on the government.
How did Asian markets perform?
- Japan’s Nikkei ended at a near two-week low amid slowdown jitters and even China’s markets were in retreat after days of steady gains off the back of easing Covid restrictions.
- On Friday, The Nikkei share average fell 1.73% to 25,935.62, its lowest finish since June 20, after rising as much as 0.5% earlier in the day. For the week, the index fell 2.1%. The broader Topix lost 1.38% to 1,845.04 and posted a 1.1% weekly loss.
- Tokyo’s index fell for a third straight session, tracking Wall Street’s overnight losses, as investors worried about an economic slowdown in the world’s largest economy.
- China stocks logged a fifth weekly gain on signs of economic recovery but closed lower on Friday, tracking Asian markets as investors fretted about the global economic outlook.
Bonds and Commodities
- Bond yields fell significantly. The yield on the 10-year Treasury, which helps set mortgage rates, fell to 2.89% from 2.97% last Thursday. The yield on the 2-year Treasury slipped to 2.83% from 2.92%.
- Benchmark U.S. crude oil for August delivery rose $2.67 to $108.43 a barrel Friday. Brent crude for September delivery rose $2.60 to $111.63 a barrel.
- Wholesale gasoline for August delivery rose 15 cents to $3.69 a gallon. August heating oil rose 11 cents to $3.94 a gallon. August natural gas rose 31 cents to $5.73 per 1,000 cubic feet.
- Gold for August delivery fell $5.80 to $1,801.50 an ounce. Silver for September delivery fell 68 cents to $19.67 an ounce and September copper fell 11 cents to $3.60 a pound.
Currencies
- DXY trade-weighted dollar index is now near a 10-year high, close to 105
- The dollar dipped 0.37% against the Japanese yen to 135.26. The Japanese currency hit a 24-year low of 137.01 per dollar on Wednesday.
- Sterling reached a two-week low of $1.1976 a day after official data showed a record shortfall in Britain’s current account deficit in early 2022.
- In cryptocurrencies, bitcoin resumed its slide lower, slipping 2.63% to trade just above $19,400.
Next week
Next week, the labor market will be in the spotlight with the Labor Department’s June nonfarm payrolls report due for release on Friday. Other labor market reports, including the Job Openings and Labor Turnover Survey (JOLTS), as well as ADP’s National Employment Report tracking private-sector payroll growth, will provide further insights into the labor market.
International PMI surveys tracking business sentiment throughout the U.K. and eurozone will be released on Tuesday. Meeting minutes for the FOMC’s latest policy meeting, held in mid-June, will become available Wednesday.
It will be a quiet week for corporate earnings, just before second-quarter earnings swing into high gear in mid-July.