Stocks Rebound Strongly from Their Worst Week This Year

Wall Street rallied Friday as Treasury yields eased a bit. The 10-year benchmark rate had topped 4% Thursday, for the first time since November, before moving back to 3.96% at the end of the week. The 2-year Treasury yield traded at 4.86% after reaching highs not seen in more than a decade. Government bond yields ticked down even as a return to growth of U.S. service activity in February (first time in eight months) suggested the economy remains resilient despite the Fed rate hikes. 

The Dow Jones Industrial Average rose 1.75%, or 574 points, turning back into positive territory for the year (+0.74%). The tech-heavy Nasdaq Composite gained 2.58% (+11.68% year-to-date), while the S&P 500 rose 1.90% (+5.37% YTD), snapping its three-week losing streak.

European markets followed suit with the MSCI up 2.37% (+12.53% YTD) and the FTSE 100 up 0.87% (+6.65% YTD). Yet inflation data in France and Spain came in higher than expected. The ECB has promised another 50-basis point rate hike at its upcoming meeting in mid-March.

In Asia, China's manufacturing activity expanded at a fast pace in February, amid the recent rollback of pandemic restrictions. The adjusted Purchasing Managers’ Index™ (PMI™) rose from 49.2 in January to 51.6 in February. The Shanghai Composite gained 1.87% over the week (+7.74% for the year) as the economic recovery is picking up steam. Japan’s Nikkei performed in line with its peers (up 1.73% for the week, up 7.02% YTD).

Growth sectors attract dip buyers 

Most defensive sectors were in the red this week. Utilities lost 0.69%, extending the slump seen since mid-January. It was the worst S&P sector over the last seven weeks. Consumer staples edged down 0.41% while health care edged up 0.51%. 

By contrast, the China PMI™ report gave a big boost to the industrial metal sector (best performer this week, up 4.02%) as well as industrial stocks (+3.25%). Communication services partially recovered (+3.27%) from the severe loss suffered last week, helped by META (+8.72%) and GOOG stocks (+5.23%). Energy fared well too (+2.94%) as natural gas prices jumped over 35% in the last two weeks. WTI futures gained 4.40% this week though Bank of America analysts cut their estimate for average U.S. crude prices this year and Russian oil continues to flow despite sanctions. Lastly, tech stocks also attracted investors (+2.93%). APPL stocks were up +2.94%.