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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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Most US equities indexes ended the week lower, although the tech-heavy Nasdaq Composite advanced modestly and cleared the 20,000 mark for the first time. The Russell 2000 Index recorded a second consecutive week of underperformance against the S&P 500 Index. Growth stocks posted a third consecutive week of outperformance versus value, thanks in part to gains in shares of Tesla (12%) and Alphabet (8.4%). On the macro-economic side, stagflation fears started to rise once again. Indeed, YoY CPI and PPI both accelerated. Meanwhile overall macro surprises disappointed for the fourth week in a row: on Thursday, the Labor Department reported a surprise jump in weekly initial jobless claims to a two-month high of 242,000.