Week from April 11th to 17th, 2022. Investors preferred to reduce their positions before the long Easter weekend.
S & P 500 fell -2.13% in 4 business days. Dow Jones fell -0.78%. Nasdaq fell -2.63% as growth stocks were penalized for further rises in government bond yields. Therefore, the 10-year T-Note recorded the highest level since December 2018, + 2.83%. The Consumer Price Index (CPI) showed a 8.5% change over the last 12 months of March, compared to the consensus expectation of 8.4%, far from the Federal Reserve’s 2% target. However, the core index, excluding energy and food, rose only 0.3% last month, compared to 0.5% expected by economists. It’s interesting to note that in this difficult situation, the small caps outperform the large caps (Russell 2000 increased by + 0.52%).
In other parts of the world, major stock indexes have moved primarily to the negative territory. MSCI World fell -1.74%. In Europe, MSCI EMU fell -0.24% and FTSE fell -0.69%. Following the board, the European Central Bank did not make a big decision without changing key interest rates. In Asia, Shanghai Composite fell -1.25% as Chinese stocks continued to be under pressure from the Covid-19 pandemic. On the other hand, in Japan, the Nikkei recovered some color (+ 0.40%), and the US dollar rose especially against the yen.
High-tech stocks hit again with rising Treasury yields
The accelerated rise in US Treasury yields once again hit growth stocks, with Big Tech stocks hit hardest. Within the S & P sector, information technology recorded the worst weekly performance (-3.82%), especially by Microsoft (-5.77%). Communication services have improved a bit (-3.00%), and FB-Meta and Google-Alphabet have dropped significantly to -5.46% and -5.04%, respectively. In addition, the title Twitter ended in the red (-2.5%) after Elon Musk bought it for $ 54.20. However, many market players doubt that this proposal will work.
The healthcare sector has also lost ground (-2.93%) as well as financial equities (-2.65%), but the latter generally benefits from rising bond yields. Unfortunately, at the same time, most banks warn that costs will continue to rise this year, impacting margins. As a result, the financial sector recorded the strongest net redemption of the week.
Despite rising tourism and travel stocks, consumer discretionary departments lost -0.81% under Amazon weight after better than expected results (weekly change + 15.3%) announced by Delta (weekly change + 15.3%). -1.79%) and Tesla (-3.95%).
Only four sectors: crude oil (+ 0.69%), industrial (+ 0.43%), consumer staples (+ 0.15%) and energy (+ 0.32%) end in the positive territory, with gas prices at $ 7.3 / + 14% higher than. MMBtu (+ 27.5% from the beginning of the month) and WTI crude oil prices recovered + 8.84% after falling -13.73% in the last two weeks.
Rapid decline in bond investment
US Treasury sales accelerated Thursday and had a spillover effect on all other fixed income segments. Therefore, in Europe, the Bund yield for 10 years increased by 13 basis points from + 0.71% to + 0.84%. France’s OAT with the same maturity closed at + 1.34% (+9 basis points), the highest level since September 2014, against the backdrop of the sharp inflation and political risks associated with the French presidential election. According to the results of various polls, the gap between the last two candidates is actually much thinner than expected.
It lasts for several weeks and repeats for all the riskiest bond classes. Those in the “investment” rating suffered additional losses (-0.63% in Europe and -1.17% across the Atlantic). High-yielding stocks fell -0.72% in Europe and -0.15% in the United States.
Emerging debt in local currencies has fallen by -0.21% and greenbacks continue to strengthen weekly (dollar index rises + 0.67% to 100.50, the highest level in 20 years!). American currency. Similarly, gold acted as a safe haven (+ 1.58% in a week, spot price $ 1 oz $ 1978.24).
Finally, it was another challenging week for crypto investors. Bitcoin has returned to the $ 40,000 threshold (down -5.5%) and Ethereum has plummeted -7.5%. Both assets are highly correlated with technology stocks and have been shown to provide a slight diversification in the portfolio of risky assets.
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