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WEEKLY SUMMARY: Stocks shook off latest bank fears
US equity returns varied widely over the week as banking industry and recession worries weighed on value stocks and small-caps, while large-cap growth stocks benefited from falling interest rates. Financials underperformed for a third consecutive week while the average stock remained significantly weaker than the S&P 500 Index’s return suggests. As was widely expected, the Fed raised rates by 25 basis points and the “dot plot” indicated that officials expected to stop raising rates after one more hike in May. References to ongoing rate increases were also removed from the official statement. On the macro side, the S&P Global’s Composite Index of both current services and manufacturing activity jumped from 50.1 to 53.3, indicating the fastest pace of private sector growth since last May, with new orders turning higher for the first time since September. The upside data surprises appeared to lift the yield on the benchmark 10-year U.S. Treasury note from a six-month intraday low on Friday morning, but the yield still finished modestly lower for the week. Shares in Europe gained ground, despite weakness in bank stocks. Chinese stocks rose on hopes that the country’s central bank will maintain an accommodative stance amid the global banking turmoil. Despite gold's appeal, it ended the week basically unchanged, rebounding from the early week losses and topping $2000 twice intraweek. WTI oil could not hold above $70. Cryptos were volatile.
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The major US equity benchmarks retreated for the week amid heightened fears of conflict in the Middle East and some signs of persistent inflation pressures that pushed long-term Treasury yields higher. Large-caps held up better than small-caps, with the Russell 2000 Index suffering its biggest daily decline in almost two months on Wednesday. Growth stocks fared better than value shares. Wednesday morning’s release of the US CPI data, which came in higher than expected, weighed on investors’ sentiment. Overall inflation rose 3.5% yoy, its biggest gain since September. The “supercore” inflation (services prices excl. energy and housing costs) jumped 4.8% yoy, substantially higher than expectations and its biggest increase in 10 months.