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WEEKLY SUMMARY: Stocks down 3 weeks in a row, Gold at all-time-high
Stocks recorded broad losses, as concerns over tensions in the Middle East and the possibility of U.S. interest rates remaining “higher for longer” appeared to weigh on sentiment. Mega-cap technology shares lagged as rising rates placed a higher theoretical discount on future earnings. A Q1 revenue miss from ASML Holdings also seemed to weigh on the sector and on general optimism toward companies with AI-related earnings. Some strong economic data (e.g retail sales +0.7% vs. 0.3% expected) appeared to increase worries that the Fed would push back any interest rate cuts to the fall, if not to 2025. Conversely, downward surprises in housing market data may have furthered inflation fears by auguring continued supply tightness. As was the case last week, Fed officials expressed their concern with recent economic data. The retail sales data helped push the yield on the 10-year U.S. Treasury note to its highest intraday level since early November. The pan-European STOXX Europe 600 Index ended 1.18% lower as tensions rose in the Middle East. The Nikkei 225 Index was down 6.2%. Chinese equities rose after the economy expanded more than expected in Q1. Despite two major attacks in the Middle East, oil prices ended lower for the second week in a row. Some knock-on effects from an evaporation of hope for demand-sponsoring rate-cuts also weighed on sentiment. Gold closed the week at a new record high. Bitcoin was down, as geopolitical chaos weighed on sentiment ahead of the halving.
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US equities gave back a portion of the previous week’s gains, as uncertainty over the incoming administration’s policies appeared to continue driving the so-called Trump Trade. Financials and energy shares continue to benefit from hopes for deregulation and merger approvals. Likewise, the price of Bitcoin had surged by nearly a third since the eve of the election, as investors anticipated looser regulation of digital currencies. Conversely, health care shares fell sharply following news that Robert F. Kennedy, Jr., would be Trump’s nominee to head the Health and Human Services Department (HHS). On the macro side, yoy US headline inflation rose for the 1st time since March, from 2.4% to 2.6%. PPI data came in above expectations.