Wall Street sinks after Amazon’s first loss since 2015     

It was a wild week for US equities. Major indexes shifted between slumps and rallies and finally ended in the red, pushed lower by Amazon.com’s Q1 results. The e-commerce giant delivered a disappointing quarter and painted a gloomy picture for the retail market with a weak revenue forecast. Slowed growth and higher costs resulted in a net loss of $3.8bn. 

Against this backdrop, the S&P 500 Index slumped for the fourth straight week (-3.27%) closing out a dismal month, the worst since March 2020 (-8.80%, -13.31% year-to-date). The 30 component Dow Jones Industrial Average tumbled -2.47% (-9.25% year-to-date), while the Nasdaq plunged -3.93% as traders shun the high-flying sector. The latter is now in bear market territory, dropping -21.16% since the beginning of the year. After posting huge gains in the last two years, big tech appears to be overpriced under the pressure of rising interest rates.

European markets closed mixed. In the UK, the FTSE edged up +0.30% (+2.17% YTD). In Germany, the DAX edged down -0.31% (-11.25% YTD). In France, the CAC40 fell -0.72% (-8.66% YTD). Emmanuel Macron who won a second term as French president last Sunday did not offer any relief. In Asia, the Shanghai Composite extended its losing streak to four weeks (-1.29% WTD, -16.28% YTD) with a surge in Covid-19 cases denting risk appetite. Japan’s Nikkei slid -0.95% (-6.75% YTD) after two positive weeks. Emerging markets struggled to stay in the green (MSCI EM up +0.05%, -12.65% YTD).  

All the S&P sectors lose ground, consumer discretionary fares worst     

Amazon.com (-13.90% WTD) and Tesla (-13.36%) were the biggest drag on the consumer discretionary sector (-7.89%, S&P 500’s worst performer this week). Yet Elon Musk said he does not plan to sell any more Tesla stocks to fund his bid for Twitter but Tesla investors fear that this takeover and his new ‘X Holdings’ conglomerate may distract him from the EV automaker. Financials (-4.59% WTD) also exacerbated the market sell-off after weaker quarterly results. Though FB Meta's shares rallied (+8.89% WTD thanks to a rebound in daily active users, -40.40% YTD) despite slowing revenue, communication services (-4.09%) had a tough week too with Google-Alphabet missing Q1 EPS expectations (stock down -3.89%).

By contrast with the previous weeks, the most defensive sectors offered no respite for the broad market. Real estate nosedived (-5.66%) and consumer staples fell -2.08%. Even in the energy sector (-1.29%), most companies closed lower in spite of rising oil and natural gas prices. WTI Crude rose to $104.69 a barrel (+2.57%) while natural gas was trading at $7.25 (+11.03%).

Bloodbath for bonds 

The US 10-year Treasury yield finished up (+2.93%) for the seventh out of eight weeks, suggesting investors are still pricing in red-hot inflation and higher interest rates. In the eurozone, the latest report from statistics agency Eurostat shows inflation hit a record high of 7.5% in April (annual estimate). Thus, it comes as no surprise that investment grade corporate bonds suffered losses for the fourth week in a row (-0.32% in Europe, -1.02% in the US). High-yield bonds fell -1.48% in Europe and -0.69% in the US. 

Emerging debt in local currencies plunged -2.24% while the Dollar Index hit a 20-year high above 103. The Federal Reserve is likely to adopt a 50bp rate hike next month. Elsewhere, precious metals trended lower with gold down -1.79% (spot price at $1,896.93/Oz) and silver down -5.76%.

In the crypto space, Bitcoin [BTC] edged toward $38k (down -3% week-over-week) while Ethereum [ETH] lost 3.3%, both assets moving in tandem with tech stocks. At the same time, BlackRock announced the launch of its Ishares Blockchain and Tech ETF [IBLC], about a week after Fidelity listed its Crypto Industry and Digital Payments ETF [FDIG] and its Metaverse ETF [FMET]. The new Exchange-Traded Fund trades on the NYSE Arca.

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