Weekly Market Report: April 29, 2022
Risk markets last week sensed potential escalation paths in Ukraine alongside a persistently hawkish tone from the Fed and some mixed earnings reports, resulting in a sharp turn lower in equity markets, no significant moves in interest rates, and a safe-haven surge in the USD. The S&P 500 endured a fourth consecutive down week, ending down nearly 9% in April but developed and emerging market international stocks held up a bit better. Commodities and interest rates didn’t move much on the week with next week’s FOMC meeting on deck while the USD surged to nearly a twenty-year high.
• Equity markets limped to end the week (-3.3%) and month (-8.7%) including a sharp move lower to end trading on Friday afternoon. Bespoke noted some observations regarding VIX (not peaking), semis (downtrend with support), breadth (improving), and the value/growth cycle.
• The rout in technology stocks continued last week, bringing the NASDAQ to a 13% loss in April, now down 21% YTD, its worst four month start to a year since the GFC.
• A weak GDP number countered by continued inflationary pressures seems unlikely to take the Fed off its path from ‘easy/emergency’ to ‘neutral’ policy but a pivot to ‘tight’ still seems off on the horizon.
• The Fed is widely expected to increase the Fed Funds rate by 50bps this week and announce details of their balance sheet reduction plan.
• The USD rallied 0.5% on five consecutive days through Thursday, tying 1978 and 1985 for the longest streak of that magnitude of a gain. It is now up 8% YTD and at levels not seen since 2003.
• Anxiety provoking rhetoric and conflict surrounding the Russian invasion of Ukraine including Russian accusations of a NATO proxy war and potential European energy embargos on Russian oil have fueled equity market volatility.
• FactSet noted that 55% of S&P 500 companies have reported earnings with beat rates and margins of 80% and 3.4% respectively. Blended earnings growth is at 7.1%. Revenue beat rates and margins of 72% and 2.2% alongside revenue growth of 12.2% remain relatively encouraging.
• The U.S. Senate confirmed Lael Brainard as Vice Chair of the Federal Reserve last week, 52-43.
• French President Macron defeated Marine Le Pen garnering 59% of the vote last week in what was half of his margin of victory in the prior contest back in 2017.
• An array of conditions has fed into an aggressive selloff in the RMB recently including deteriorating economic conditions, a narrowing trade surplus, and easing monetary policy.
• Blaine Rollins wrote that the semiconductor shortage has reached a level where an industrial company is buying washing machines to strip out the semiconductors to use in their modules.
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