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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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US stocks recorded modest gains over the shortened trading week (markets were closed on Wednesday), with the S&P 500 hitting 5,500 intraday for the 1st time ever. The week also saw modest signs of rotation in the market, with value stocks outperforming growth as Nvidia suffered its first down-week in two months. Friday was a so-called triple-witching day, with roughly USD 5.5 trillion in options related to indexes, stocks and ETFs expiring. The start of the week brought some evidence of US economy easing with retail sales signalling less discretionary spending. But data released later in the week suggested that the economy was stronger than indicated by retail sales.