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Worst week since June for S&P 500 and Nasdaq
Stocks hit its lowest point on an intraday basis since mid-July on Friday as inflation fears intensified. Growth stocks fared worst, with the Nasdaq Composite falling nearly 5.5%. Alphabet and Meta Platforms hit new 52-week lows. We note that the VIX index remains well below the levels seen at the start of the pandemic. The main event of the week was Tuesday’s US consumer price index (CPI) report. Headline prices rose 8.3% yoy versus 8.1% expected. Core inflation (excluding food and energy) jumped to 6.3%—its highest level since March and above expectations of 6.1%. These numbers dimmed hopes for investors that the economy had moved beyond “peak inflation.” On Friday, a gloomy outlook on the global economy from shipping giant FedEx sent stocks sharply lower after the transport giant pulled its earnings guidance for fiscal year 2023 and its new CEO told CNBC that he expected a global recession. FedEx stock fell by about 21% in trading on Friday. Meanwhile, the two-year U.S. Treasury note yield traded around 3.90% early Friday morning—its highest level in nearly 15 years. Shares in Europe pulled back amid signs of a deepening economic slowdown. The STOXX Europe 600 Index ended 2.89% lower. The British pound depreciated against the U.S. dollar, sinking to levels last hit in 1985. China’s stock markets fell as currency weakness and downbeat property data overshadowed surprisingly strong factory output and retail sales indicators.
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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.