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The Long and Short of it, week ending 14 April 2022

Posted: 20 April, 2022

Topic: Telecoms , Financials , Basic Materials , Energy , Healthcare , Industrials , Technology

week the Dow Jones Industrial Average significantly outperforming both the Nasdaq Composite and S&P 500Index as value stocks continued to outperform growth stocks. Inflation concerns, spurred by near-record CPIand PPI releases (Tuesday and Wednesday, respectively), rising interest rates, Chinese Covid-related lockdowns and growing concerns an aggressive Fed may precipitate slower growth or a recession were all factors pushing stock markets lower last week. 10-year U.S Treasury rates rose again last week, increasing 13bps. Most of the increase, again, came from rising real rates (+10bps to -0.08%) but 10-year inflation expectations also rose, increasing 3bps to 2.91%. At week’s end, the S&P 500 Index decreased 2.1% to 4,392.59, the Nasdaq Composite Index fell 2.6% to 13,351.08, the Dow Jones Industrial Average decreased 0.8% to 34,450.84, the 10-year U.S. Treasury rate rose 13 bps to 2.83% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) strengthened 0.6%.

European stock markets also finished the week lower but less so than U.S. stock markets and with less
volatility. Near-record high U.S. CPI and PPI releases and sharply higher U.K. inflation (released Wednesday) increased inflation concerns, pushing stock prices lower through Wednesday. The as-expected ECB decision Thursday to leave monetary policy unchanged, with quantitative easing expected to end July and rate hikes to follow soon after, reduced concerns of a more aggressive ECB, perhaps moving stock markets higher Thursday. Weaker retail and banking stock performance pushed the FTSE 100 Index lower on the week than the STOXX 600 Index, despite rising commodity prices. The 10-year UK government rate and the 10-year Bund rate increased 15bps and 13bps, respectively, last week with the 10-year Bund rate finishing the week at 0.84%. At week’s end, The FTSE 100 Index fell 0.7% to 7,616.38, the STOXX 600 Index decreased 0.2% to 459.82, the 10-year UK government rate increased 13bps to 1.90%, the Euro weakened 0.6% and British pound strengthened 0.3%, both with respect to the U.S. dollar.