Home / Research / The Long and Short of it, week ending 22 April 2022

The Long and Short of it, week ending 22 April 2022

Posted: 26 April, 2022

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

U.S. stock markets moved lower in another volatile week spurred by hawkish comments from Fed Chairman Powell and outlier weak earnings from Netflix, Verizon and Universal Health Services (Netflix plummeted 35% Wednesday after its after-hours earnings release Tuesday). All three major stock market indexes were higher through Wednesday with risk-on sentiment increasing after two weeks of drawdowns and with sharply falling oil prices. Chairman Powell’s comments on Thursday proclaiming the need to immediately tame inflation and stating a 50bp increase is being considered in May pushed markets sharply lower over Thursday and Friday with the Nasdaq Composite Index, for example, losing over 4.5% over those two days. The Dow Jones Industrial Average continued to outperform both the Nasdaq Composite and S&P 500 Indexes. Rising 10-year U.S. Treasury rates, reaching a high of 2.94% Tuesday, reflecting investor concerns of continued high inflation and rising real yields, increased expectations of slowing economic growth and even of a recession. While the 10-year U.S Treasury rate ended the week off its intraweek high, it closed 8bps higher due entirely to rising 10- year inflation expectations. At week’s end, the S&P 500 Index decreased 2.8% to 4,271.78, the Nasdaq Composite Index fell 3.8% to 12,839.29, the Dow Jones Industrial Average dropped 1.9% to 33,813.44, the 10- year U.S. Treasury rate rose 8 bps to 2.91% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) strengthened 0.9%.

A down week for European stocks as well. Up through Thursday on strong earnings reports, both the STOXX 600 and FTSE 100 Indexes fell sharply Friday following Fed Chairman Powell’s hawkish comments Thursday, pushing both indexes into the red. Gains throughout the week were capped by continued Russia-Ukraine war concerns and elevated inflation levels as well as by hawkish comments from FOMC members. Economic growth expectations were lessened as both the IMF and World Bank lowered growth forecasts by nearly 1% early in the week citing repercussions from the Russia-Ukraine war and already high inflation. Friday’s UK reports of flagging retail sales and consumer confidence, perhaps reflecting the dampening effects of high inflation, also pressured stock prices lower. Both the Euro and the British pound weakened, reflecting expectations of aggressive Fed. 10-year rates continued to move higher, though, with the 10-year UK government rates increasing 7bs and the 10-year Bund rate rising 12bps. At week’s end, The FTSE 100 Index fell 1.2% to 7,521.68, the STOXX 600 Index fell 1.4% to 453.31, the 10-year UK government rate increased 7bps to 1.97%, the Euro and British pound weakened 0.3% and 1.7%, respectively, both with respect to the U.S. dollar.