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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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US equities advanced in the first full trading week of the year as investors largely looked past mounting geopolitical tensions, pushing most major indexes to all-time highs. Small-cap and value shares outpaced the large-cap growth stocks that have led returns in recent years, while an equal-weighted version of the S&P 500 Index outperformed its market cap-weighted counterpart. Of the major indexes, the Russell 2000 Index performed best, adding 4.62%, while the S&P 500 performed worst but still gained 1.57%. Stocks of aerospace & defense companies and homebuilders were volatile after several announcements by the Trump administration.