Investor concerns about slowing corporate earnings and prospects for rapidly
rising interest rates deepened throughout Friday’s trading session, undoing gains
early in the week. The Dow Industrials lost over 980 points (-2.8%) on Friday, its
worst single-day performance since October 2020 to cap its fourth-straight weekly
loss. The S&P 500 capped a three-week slide near a one-month low. After a late
March revival, the Nasdaq Composite is down almost 10% for the month, while
the S&P 500 and Dow have retreated 5.7% and 2.5% respectively in April.
For the Week…
The S&P 500 fell 2.74%, extending its YTD loss to 9.99%. The Dow Jones
Industrial Average lost 1.86%, and the Nasdaq Composite tumbled 3.83%. The
S&P 500 is back in correction status, down 10.6% from its January high, while
the Nasdaq is in a bear market, off over 20% from its November 2021 record.
Aggressive Rate Prospects
Fed Chairman Powell signaled last week that the central bank will likely hike
interest rates by a ½-point at their May 3-4 FOMC meeting. He also indicated
similar incremental increases may be warranted after that to bring inflation back
to their 2% target. A May rate hike will mark the Fed’s first set of increases at
back-to-back meetings since 2006 and first ½-point increase since 2000.
Real Estate Performs Best
Just two of the 11 major sector groups posted gains last week, Real Estate
(+1.24%) and Consumer Staples (+0.49%). Communication Services (-7.74%),
Energy (-4.56%) and Materials (-3.72%) tumbled the most, while Industrials
(-1.54%) and Consumer Discretionary (-1.77%) fell the least.
Treasury Yields Edge Higher
Treasury yields showed signs of stabilizing as the yield on benchmark 10-year
Treasury notes ended Friday at 2.902%, down in two of the final three days last
week. Its yield climbed as high as 2.94% on an intra-day/week basis as Fed
Chairman Powell essentially sealed his case for a 50 basis point May rate hike.
The U.S. Dollar Index strengthened for a third consecutive week, climbing 0.72%
last week. U.S. WTI crude oil futures declined just over 4.5% last week, ending
Friday at $102.07/barrel.
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