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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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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.