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CHART OF THE WEEK: PANIC SELLING
Market sentiment is more bearish now than at March bottom…
WEEKLY SUMMARY
Rising interest rate fears and growth worries pushed the S&P 500 Index to its biggest decline since October 2020. US small caps and the Nasdaq declined the most. The Russell 2000 index had its worst week since June 2020. The Nasdaq index slumped roughly 7.5%, its biggest weekly drop since the start of the pandemic. Weakness in semiconductor shares weighed on technology stocks, while weakness in automakers and home improvement retailers dragged down the consumer discretionary sector. A more than 20% decline in Netflix shares following its fourth-quarter earnings report contributed to the indexes’ losses on Friday. Financial stocks JPMorgan Chase and Goldman Sachs were hard hit as well. Shares in Europe ended lower, as expectations grew that the ECB would raise interest rates this year. In Fixed Income, the US jobs data appeared to result in the flattening of the Treasury yield curve. The US 10-year yield hit 1.90% on Wednesday—its highest level since late 2019—but fell back sharply in the wake of Thursday morning’s weaker-than-expected jobless claims report. The dollar ended the week higher - its best week in the last 5. Cryptocurrencies collapsed as Bitcoin hit $35k and Ethereum $2,500.
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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.