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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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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.