U.S. stock market miraculous turnaround

Wall Street finally ended the week in the green. An Apple-led big tech rebound ultimately helped the broader market snap a three-week losing streak. The tech giant (first market cap: >$3 trillion) overcame supply chain fears, smashing analysts’ expectations with a monumental quarter on strong demand for its new iPhone (especially in China) and services. The S&P 500 thus rose +0.77% week-over-week, the Dow Jones Industrial Average gained +1.34%, or 460 points, while the Nasdaq finished flat (+0.01%). Conversely, small cap stocks failed to find their footing (Russell 2000 down -0.98%).

The same held true for European and Asian markets. The MSCI EMU lost -2.25% amid US-EU-Russia tensions over Ukraine while the FTSE 100 slid -0.37%. In Asia, the Shanghai Composite plunged -4.57% and Japan’s Nikkei fell -2.92%. Emerging markets also performed poorly (MSCI EM down -4.27%).

Sector dispersion

Though US oil stockpiles unexpectedly rose in the latest week, WTI Crude closed higher at $86.82 a barrel (+1.97%, sixth positive week in a row). The recent drop in energy stocks (-3.08% last week) was largely offset by the gain of +5.01% this week. Energy topped the sector gainer list, outpacing the S&P 500 gain by a huge margin. Information technology also shined (+2.26%) in the wake of Apple (+4.88%) and Microsoft (+4.33%). That said, the slump in semiconductors weighed on broader tech (Intel Corp down -8.28% as higher investment costs may hurt future earnings). Financials showed signs of stabilization (+1.32%) after American Express (+11.54%) beat the consensus estimates for revenues and earnings.

By contrast, it was another tough week for industrials (-1.47%), utilities (-1.36%), and consumer discretionary (-0.96%) as Tesla nosedived again (-10.33% WTD, -19.91% YTD) even though the EV maker reported better-than-expected quarterly results. Unfortunately, supply chain issues could weigh on its output in 2022.

Bond sell-off

Treasury yields turned higher Wednesday (US 10-year T-note yield topping +1.87%) after the Fed signaled a first rate hike in March. They stabilized a little later (10-year yield at +1.778% on Friday). In Germany, the 10-year Bund yield edged up from -0.064% to -0.043% while the French OAT yield stood at +0.37%.

Amid this backdrop, risky bonds lost ground. Prices of IG corporate bonds plunged -0.41% in Europe and -1.23% on the other side of the Atlantic. High-yield bonds followed suit (-0.75% in Europe, -1.25% in the US). Emerging debt did not perform better (-1.53% in local currencies) as the greenback continued its ascent after the Fed’s meeting (dollar index up +1.67% at 97.22). Elsewhere, gold was down (spot price at $1,791.53/Oz, -2.39%).

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