As earnings season gets into high gear, inflation and rate worries continue to weigh on investors. The major US indices recorded their second consecutive weekly loss and the tech-laden NASDAQ posted its third. Financial shares were also under pressure as JP Morgan and Citigroup reported lower fourth-quarter profits. Energy shares rallied on higher oil prices, which have revisited late-October highs.
With bond yields on the rise, stocks staged a formidable retreat in their first week of trading for the year. Higher rates particularly took a toll on growth and technology stocks, which suffered their biggest weekly decline in nearly a year, as the yield on the 10-year Treasury touched 1.8%.
Fed tightening and omicron spike fears made for a volatile week last week. With expectations for higher interest rates, growth and tech stocks fared the worst. The NASDAQ Composite ended 7% below its recent peak, but still above the 10% correction territory threshold.
Investor fears surrounding the omicron variant of COVID subsided last week as early indications suggest it is contagious but mild and that current booster shots were likely 70-75% effective in preventing illness. The S&P 500 saw its best weekly gain since February, with tech stocks driving much of the market's rally.
Markets were volatile last week thanks to concerns about faster Fed tapering and fears that the emergence of the new COVID strain Omicron could dampen global growth and exacerbate supply chain issues.
The NASDAQ hit a record high last week, while other benchmarks ended mixed. Growth stocks outpaced value names, which is one of the factors lifting the tech-heavy NASDAQ into record territory. Strong economic data and corporate earnings were offset by inflation fears, ongoing supply chain constraints, and a return of COVID in Austria and Germany.
Stocks sold off from record highs last week, as investors digested inflation data recording the highest inflation levels in nearly thirty years. The Consumer Price Index (CPI) climbed 0.9% in October, much higher than consensus estimates for 0.6%. The increase brought the YOY % level to 6.2%, the highest inflation since December of 1990 during the Gulf War. This led the S&P 500 to end its longest winning streak since 2017.
Stocks posted impressive gains for the week thanks to a dovish Fed meeting, healthy economic data, and more strong earnings. Oil prices dipped on the possibility of releasing supply from the strategic reserve.
Stocks hit new highs last week during the busiest week of the third-quarter earnings season. Consumer Discretionary stocks were the biggest winners in the S&P 500, boosted by a jump on Tesla shares on news that Hertz was buying 100,000 EVs.
Large-cap and mid-cap indexes moved to record-high territory last week, boosted by a series of positive earnings surprises. Further reflective of strong investor sentiment, the VIX fell to its lowest level since the beginning of the pandemic, approaching 15.
