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WEEKLY SUMMARY: S&P 500 index down 6 weeks in a row
It was another volatile week in Wall Street as the S&P 500 recorded losses for the sixth week in a row - the longest negative stretch since 2008. Investors appeared to grow increasingly skeptical that the Fed will be able to achieve a “soft landing” for the economy. At its low point on Thursday, the S&P 500 was down nearly 18% from its peak, well into correction territory but just above the -20% performance threshold that typically defines a bear market. US equities pared losses on Friday, helped by a rally in Tesla after Elon Musk tweeted that his deal to buy Twitter—partly funded by sales of a portion of his stake in Tesla —was “on hold.” On Wednesday, US inflation data weighed on sentiment as headline numbers fell back a bit from March’s pace but not as much as expected, rising 8.3% y/y versus consensus estimates of around 8.1%. The smaller-than-expected decline in consumer inflation caused a brief jump in the 10-year U.S. Treasury yield on Wednesday, but it ended sharply lower for the week as a whole and fell back below 3.0%. Shares in Europe rebounded from earlier weakness to finish higher, despite ongoing concerns about inflation and ECB’s Lagarde hinting at potential rate increase in July. Chinese stocks rallied as a fall in covid cases and reassuring comments from the securities regulator lifted investor sentiment. Cryptocurrencies crashed on the back of the Terra-USD stablecoin implosion, further suggesting a strong risk-off environment.
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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.