Weekly Market Update 03/20/2022
by Justin J. Long CFP®, on Mar 20, 2022
Spring training is finally here! While we here in Las Vegas missed out for the second year in a row on Big League Weekend, the games officially started this week in Florida and Arizona. With today being the first day of Spring, the ability to stream some baseball on television, and the weather predicted to be in the 80s this week, it's starting to actually feel like winter is behind us. What are your plans for Spring?
And now on to the recap of this week:
Week in Review: Big rally week for equities
U.S. equities closed higher to end the week, and in the process extended a three-day run of gains that enabled the markets to post one of their best weeks since November 2020. The Information Technology sector helped set the pace for stocks on the day and helped the tech-heavy Nasdaq to lead the major U.S. indices. The ongoing developments surrounding the war in Ukraine remained at the forefront for investors after President Biden and Chinese President Xi spoke earlier today on the matter, as well as other issues.
The S&P 500 rallied 6.2% this week on the back of a four-day winning streak, as the market preferred to look at things from a positive perspective. The Dow Jones Industrial Average (+5.5%) and Russell 2000 (+5.4%) each rose over 5.0% while the Nasdaq Composite surged ahead with an 8.2% gain.
Ten of the 11 S&P 500 sectors closed higher with nine sectors rising between 2.7% (real estate) and 9.3% (consumer discretionary). The energy sector (-3.6%) was the only sector that closed lower.
There wasn't a single catalyst for the rally. Instead, there was a confluence of factors that helped revive the market's spirits, including:
- Oil prices losing 5.6%
- Fed Chair Powell saying the probability of a recession within the next year is low
- Early reports indicating progress in ceasefire talks between Russia and Ukraine
- China vowing support for its economy and markets
- The Producer Price Index for February increasing "just" 0.8% month-over-month (Briefing.com consensus 1.0%)
- Higher Q1 revenue guidance from Delta (DAL), United (UAL), and Southwest (LUV)
Now, to qualify the good news:
- Oil prices still ended the week above $100/bbl ($103.03/bbl, -6.07, -5.6%) after dropping below $95.00/bbl during the week
- Fed Chair Powell acknowledged that monetary policy could weigh on growth rates in 2023 and 2024
- Russia refuted progress in talks and continued its bombing
- China still issued a weeklong Covid lockdown of Shenzhen, a major technology hub, which could exacerbate global supply chain issues
- The Producer Price Index was still up 10.0% year-over-year
- The airlines still forecast revenue to be below pre-pandemic levels
Another valid interpretation of the rally, then, was that the market was simply due for a technical bounce, and the bearish sentiment entering the week provided the basis for the big rally. In turn, there was likely some short-covering activity in the mix.
Regarding the Fed's policy meeting, the central bank raised the target range for the fed funds rate by 25 basis points to 0.25-0.50%, as expected, and signaled six more rate hikes this year. Fed Chair Powell said the Fed could start to reduce the balance sheet following the May policy meeting.
The Treasury market experienced some curve-flattening activity with shorter-dated rates outpacing the rise in longer-dated rates. The 2-yr yield rose 21 basis points to 1.96%, and the 10-yr yield rose 15 basis points to 2.15%.
|INDEX||STARTED WEEK||ENDED WEEK||CHANGE||% CHANGE||YTD %|
As always, it is my pleasure to bring you this weekly update. If this or anything else is causing you pause or you would like further details, please feel free to reach out to me and we can schedule some time to chat.
Justin J. Long CFP®
Diazo Wealth Group
Upcoming Economic Calendar
Source: 1. FactSet
Source: Week in perspective provided by Briefing.com. Briefing.com offers live market analysis on their web site www.Briefing.com.
The data provided is for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index. The information contained here is not guaranteed as to accuracy or completeness. All economic and performance information is historical and does not guarantee future results.
The Dow Jones Industrial Average is a price-weighted index comprising 30 widely traded blue chip U.S. common stocks. The NASDAQ Composite Index is a market-value-weighted index of all common stocks listed on the NASDAQ stock exchange. The S&P 500 Index tracks the performance of 500 of the largest publicly traded companies in the United States. The MSCI Europe, Australasia, and Far East (EAFE) Index tracks the performance of publicly traded large- and mid-cap stocks of companies in those regions. The Cboe Volatility Index (VIX) shows the market’s expectation of 30-day volatility and is constructed using the implied volatilities of a wide range of S&P 500 Index options. Weekly and year-to-date figures for the VIX show percentage changes, not investment returns. The Russell 2000 Index tracks the performance of approximately 2,000 publicly traded small-cap companies in the United States. It is not possible to invest directly in an index.
The Treasury yield curve is derived from available U.S. Treasury securities trading in the market and is provided directly by the U.S. Federal Reserve. The spread measures the difference in yield between two government securities. A normal (positive) yield curve occurs when longer-term rates are higher than shorter-term rates. The opposite holds true for an inverted yield curve. Year-to-date changes in U.S. Treasury bond yields are shown in basis points (bps). One hundred basis points equals one percent.
Oil prices are represented by West Texas Intermediate (WTI) crude oil.
The G20 countries comprise a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85% of global gross domestic product, and over 75% of global trade.
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