Week of All Dangers on Wall Street-May 16, 2022 17:28

The week of May 9th to 15th, 2022. US stocks rebounded on Friday after reaching their lowest since March 2021 on Thursday.

US stocks rebounded on Friday after hitting a record low since March 2021 on Thursday. Nonetheless, key indices have remained in the red for the past week, and investors fear that the Fed’s monetary tightening needed to fight the highest inflation in 40 years will hurt economic growth. .. According to the latest statistics, the consumer price index was 8.3% in the 12 months of April, compared to 8.1% in consensus. index”

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Excluding energy and food, it increased by 0.6% in April and 0.3% in March.

In this regard, the Dow Jones Industrial Average fell -2.14% on a weekly basis. The S & P 500 fell -2.41%, slightly above 4000 points. Performance since the beginning of the year is currently -15.57%. The Nasdaq Composite fell -2.80%. Currently, since December 31, 2021, it has lost almost a quarter (-24.54%) of its value.

Friday’s European stock index also rose again as investors took advantage of bargain hunting. But unlike their American companions, they ended the week green. Therefore, MSCIEMU rose + 1.35% (-14.06% annually), ending five consecutive weeks of losses. FTSE recovered + 0.41% and annual performance was + 0.46%. This is an exception to the long list of double-digit losses posted by most stock indexes.

In Asia, the results were more complex. The Shanghai Composite stood out with a + 2.76% rise, despite the risks posed by multiple confinements to the Chinese economy. Despite this rebound, the index is firmly fixed in bright red over 2022 (-15.26%). In Japan, the Nikkei Stock Average fell by -2.13% (-8.21% annually), significantly eliminating the rise in the previous week.

Red waves in the majority of sectors

The Consumer Staples Index was the only sector within the S & P 500 that was above the fold line (+ 0.30%). The communications service ended slightly later (-0.16%), following the last product launch, especially thanks to the strong performance of Google-Alphabet shares (+ 0.76%).

Keynote

.. Within the defense sector, healthcare (-0.94%) and utilities (-1.13%) managed to surpass a wide range of indices.

Meanwhile, real estate continued to decline (-3.87%, cumulative loss of -12.73% in 3 weeks). It was also a very difficult week (-3.58%) for finance as banks were under pressure due to the plunge in government bond yields. Information technology contributed to a broad index (-3.50%) decline, along with a plunge in Apple stocks (-6.47%). Microsoft has improved a bit (-4.95%). Stress signals also appeared in non-essential consumer goods, with a deficit for 6 consecutive weeks (-3.41%, 6 weeks total -19%). The sector has been blamed for a revision of Tesla shares (-11.10%), questioning Elon Musk’s acquisition of Twitter. Energy was not spared by the wave of decline (-2.91% weekly fluctuations, but + 6.86% from the beginning of the month). Still, US crude oil prices have exceeded $ 110 a barrel due to significant consumption and production tensions expected next summer.

Sudden trend reversal of government bonds

Yields on 10-year T-Note fell 20 basis points to + 2.935% in a week, despite very high inflation levels that only indicate a strengthening of US monetary policy. The yield curve has flattened and the spread between the two-year and ten-year yields has dropped from 43 basis points to 34, increasing the likelihood of a reversal, a potential sign of a future recession. Yields on the 10-year German Bund also fell by 18 basis points from + 1.13% to + 0.95%. That of the French OAT with the same maturity reached + 1.7%, which was a peak of almost eight years on May 9, and then returned to + 1.45%.

The escape to quality has benefited higher-rated corporate bonds. After five consecutive weeks of losses, prices for these assets rose + 0.90% (-7.34% annually) in Europe and + 0.15% (-13.82% annually) across the Atlantic Ocean. High-yielding stocks rose + 0.34% in Europe, but fell -0.61% in the United States, recording more complex results. Again, new debt has declined (-1.54% in a week, -16.86% in a year) and the greenback is still strong (dollar index above 104.5).As for precious metals, gold regained some strength on Friday, but has continued to fall sharply over the week with a -3.81% (price) decline.

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Crypto Rout

It was a terrible week for most cryptos.

Stablecoin

Terra whose value was supposed to be fixed to the dollar. It went from 95 cents to less than 17 cents in 5 days. Interestingly, however, other stablecoins such as tethers and US dollar coins, which rely on dollar reserves, have survived the storm.

Before rebounding on Friday, Bitcoin lost more than 15% as a result of the crash, limiting weekly losses to about -12%. A crypto fund was a hit. As an example, the ProShares Bitcoin Strategy ETF lost -18.83% in the first four days of the week. That said, the net inflow to these funds was ultimately positive, and buyers took advantage of the sharp drop to relocate over the weekend.

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