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CHART OF THE WEEK: French elections: not a done deal for Macron.
1st round of French elections takes place this Sunday. A Macron win is not a done deal anymore as Le Pen has been surging in the polls recently. Second round is in 2 weeks. A Datapraxis / @YouGov poll shows Macron at 51% and LePen at 49%.
WEEKLY SUMMARY: Stocks post weekly losses after Fed comments
US equity markets finished lower for the week, with small-caps and growth stocks underperforming meaningfully. Defensive sectors recorded solid gains, while Tech and consumer discretionary registered steep losses. Volumes were low as investors awaited the start of Q1 earnings reporting season. Fed policy and the situation in Ukraine continued to loom large over sentiment. Stocks pulled back sharply on Tuesday morning after Fed Governor Lael Brainard (a “dovish” policymaker) said the Fed would start to reduce its balance sheet at a rapid pace as soon as May. Stocks fell further on Wednesday as the Fed’s mid-March policy meeting minutes revealed that policymakers were prepared to reduce the central bank’s balance sheet by USD 95 billion per month, more than the consensus expectation of around USD 80 billion. The minutes also showed that the Fed is prepared to raise rates by 50bps at their upcoming May meeting. This caused the 10-year US Treasury yield to hit its highest level since early 2019. The move also led the closely watched 2s10s yield curve to steepen meaningfully. Shares in Europe rose modestly amid concerns about central bank tightening, inflation, and Russia’s invasion of Ukraine. Core eurozone bond yields climbed in tandem with U.S. Treasury yields. Investor morale in the eurozone fell to its lowest level in nearly two years in April, according to Sentix. Precious metals rose while oil was down for the 2nd week in a row. Despite The Miami Bitcoin Conference, cryptos had a rough week.
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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.