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WEEKLY SUMMARY: Equity Markets Soared As Fed Hikes Rates
US stocks moved higher for the week, ending a two-week losing streak and reclaiming much of the ground lost over the past month. While the war in Ukraine continues, investor sentiment was buoyed by falling oil prices, news that Russia had avoided defaulting on its sovereign debt, and the outcome of the Fed’s meeting. China’s announcement that it would take measures to support the economy and financial markets also appeared to boost sentiment. The tech-heavy Nasdaq Index recorded the biggest rally. As expected, the Fed raised interest rates by 25 basis points at its March meeting, the first hike since 2018. The FOMC is expecting to raise rates seven times in 2022, according to the median projection. In addition, they downgraded their forecast for economic growth, while upwardly revising inflation projections. Equity markets seemed satisfied with the Fed’s approach and rallied following the meeting while U.S. Treasury yields shifted higher. Shares in Europe gained ground for a second consecutive week while core eurozone bond yields climbed modestly. In the UK, the BoE raised interest rates to 0.75% from 0.50%, aiming to curb inflation that it now expects to reach 8% by the end of June. China equity markets weakened during the week with the Shanghai Composite index retreating 1.8%, but the tone at the end of the week was positive after policymakers pledged economic support. Dollar dumped while cryptocurrencies rallied.
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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.