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CHART OF THE WEEK
The start of 2022 saw the worst aggregate weekly loss for US bonds and stocks since the market carnage in March 2020...
MARKET SUMMARY
The S&P 500 reached a new high on Monday but then backed away as longer-term bond yields increased. Sentiment took a notable turn for the worse on Wednesday afternoon following the release of Fed minutes. They revealed that policymakers had discussed faster and more aggressive rate hikes, with the first quarter-point hike in the official short-term rate coming as soon as March. Expectations for higher interest rates took a particular toll on growth stocks and the Nasdaq Composite —which suffered its biggest weekly decline in nearly a year. Tech and Health care stocks were particularly weak within the S&P 500 Index, while energy shares outperformed as WTI oil prices pushed back toward USD 80 per barrel. Financials were also strong. Shares in Europe pulled back amid worries that central banks may turn more hawkish than expected and as Covid cases surged to record levels. Chinese stocks fell as well. In Fixed Income, the yield on the benchmark 10-year U.S. Treasury note touched 1.80%, its highest level since the onset of the pandemic. Cryptocurrencies get hammered with bitcoin plunging close to $40k. Ether performed even worse.
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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.