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WEEKLY SUMMARY: Nasdaq the biggest loser from the Fed's “No Pivot”
Stocks fell after the Fed dashed market hopes for an impending pivot in monetary policy in the form of a pause or slower pace of rate hikes. Nasdaq was the biggest loser (-5.6%) while the Dow outperformed (-1.4%). This was the Nasdaq's worst week since January. Indeed, Tech stocks suffered as the fallout from a largely disappointing earnings season for bellwethers such as Facebook, Amazon and Microsoft continued. Wednesday’s FOMC announcement and Powell’s post-meeting press conference were the focus of the week. Stocks were little changed until the press conference took a hawkish turn. Notably, Powell stated that it is “very premature” to consider pausing rate hikes, and the S&P 500 Index finished the day down 2.50%. U.S. Treasury yields increased through most of the week, with short-term rates climbing more than yields on long-maturity bonds. The two-year U.S. Treasury note yield reached a 15-year high above 4.75% on Friday morning. In Europe, shares rose for a third week running. In the UK, the BoE increased its benchmark interest rate by 0.75 percentage point to 3%, the highest level since 2008, to contain inflation. China’s stock markets rallied (+5.3%) amid speculation that the country was preparing to relax its zero-tolerance approach to the coronavirus. Stocks in Brazil returned about 3.4% after Lula won the Presidential election. The dollar was volatile but ended the week unchanged. Cryptos soared with bitcoin reclaiming $21k.
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The S&P 500 closed at a fresh all-time high on Friday, rising for a 5th consecutive week, its longest weekly winning streak since 2024. This brings the index up +15% since the March 30 low, also marking April as the best month for stocks since November 2022. Stocks largely shrugged off the stream of sometimes conflicting headlines about the war in the Middle East and a surprisingly hawkish Federal Reserve policy meeting to post solid gains in most major indexes. Large-cap stocks outpaced small-caps, and value outperformed growth. Five of the “Mag 7” companies reported earnings, with financial results generally meeting or exceeding expectations for these bellwether firms. Meanwhile, major central banks keep rates on hold amid war uncertainty.