Markets in brief
Indexes ended Monday's session higher thanks to massive reinvestment by investors in technology stocks. The Dow ended the session with gains of 103 points, the S&P advanced 0.81% and the NASDAQ gained 1.9%. Apple, Amazon, Alphabet and Nvidia all posted gains of 2% during the session, while Meta gained 4.02%, Snap 5.22% and Pinterest jumped 10.44%.
"Again, because technology suffered tremendously in the first quarter, this ends up being kind of a relief rally for technology at this point, as well as for the other growth-oriented sectors," said Sam Stovall, CFRA's chief investment officer. "NASDAQ is obviously leading the way... really because there's not a lot of recent news to put additional pressure on NASDAQ."
April is proving to be a solid month for the markets, and investors were already starting to take advantage of it at the beginning of the week. Indeed, the S&P recorded an average gain of 1.5% in April since 1928, making it the second strongest month of the year for equities, as well as a positive month for equities in the last nine years.
And let's not forget the rally of recent weeks, which has enabled indices to make up for losses accumulated since the start of the year. "As the first quarter quietly begins to become a thing of the past, investors will focus this week on the first tranche of first-quarter S&P 500 results before the unofficial start of earnings season," wrote John Stoltzfus, chief investment strategist at Oppenheimer.
Wall Street closed Tuesday's session lower as investors digested comments by a Federal Reserve official on the need for new measures to counter inflation. The NASDAQ was the worst-performing index, losing 2.26% to 14,204.17 and abandoning its 1.9% rise of the previous session. The Dow dropped 280.7 points, while the S&P 500 fell 1.26% to 4,525.12 after two consecutive sessions of gains.
"Markets are in a state of uncertainty," said Anthony Saglimbene, global market strategist at Ameriprise Financial. "Investors are waiting for the Fed meeting minutes tomorrow. And next week is earnings season. We need some updates from the companies to see how the first quarter went and, more importantly, what the outlook is."
The Fed's less accommodative stance dragged the indexes down on Tuesday, as it affirmed that it was "ready to take stronger action" against inflation. Many analysts believe that the economy and markets will have to adjust to this new rhetoric, and could face a few more difficult months.
"The market knew until now that Fed members were planning to raise rates by 50 basis points, perhaps even at each meeting. But what the market didn't know was that they were thinking of starting to reduce the Fed's balance sheet at the next meeting!" explained Gregori Volokhine of Meeschaert Financial Services. "This was not planned. This is the first time we've had a date," noted the analyst.
After the Fed chief's remarks, the yield on 10-year Treasuries jumped to 2.56% and reached its highest level since May 2019.
"It can no longer be said that we are not witnessing severe monetary tightening, even if it is justified in relation to inflation," said Volokhine. "The market continues to react downwards to what it doesn't know. What it didn't know was even harsher Fed rhetoric.
Indices tumbled on Wednesday following the release of the Fed's meeting minutes, which stated that officials "generally agreed" to reduce its balance sheet by $95 billion a month, envisaging rate hikes larger than the usual 25 basis point, or quarter-point, increases.
"Many participants stressed that one or more 50 basis point increases [...] might be appropriate at future meetings, particularly if inflationary pressures remain high or intensify," the minutes state.
However, the indices managed to make up some of their losses on Wednesday, regaining some ground. The NASDAQ, which fell by over 3% in mid-session, finally closed down 2.22%, the Dow lost 0.42% and the S&P 500 gave up 0.97%.
Consumer discretionary and technology stocks all fell on Wednesday as investors focused on traditionally defensive companies such as utilities, real estate and consumer staples. Technology stocks fell for the second session in a row, as rising interest rates would have a direct impact on these companies. Shares in Apple (-1.85%), Amazon (-3.23%), Tesla (-4.17%) and Meta (Facebook -3.68%) all fell on Wednesday.
Investors continued to look for stocks offering stable earnings, avoiding those offering future growth. They flocked to stocks such as Amgen and Johnson & Johnson, which posted gains of 2% each, or consumer staples such as Coca-Cola and Procter & Gamble, which advanced by 1%, and Walmart, which jumped by 2.3%.
Wall Street returned to the upside on Thursday as indices stabilized after two days of volatility. "The market has recovered well from the morning's losses. It seems that investors are now comfortable with the idea that the Fed has given a very clear idea of how it will act this year in terms of rate hikes and balance sheet reduction," commented Peter Cardillo of Spartan Capital.
The consumer staples and healthcare sectors led the way on Thursday, with Costco rebounding by almost 4% and Pfizer by 4.3%. Walmart, Merck, UnitedHealth Group and Procter & Gamble also posted gains. HP Inc. shares racked up gains of over 15% following the announcement by Warren Buffet's company, Berkshire Hathaway, of a stake in the technology equipment manufacturer.
"The gains of the last few days are not surprising," said Timothy Lesko, Senior Wealth Advisor at Mariner Wealth Advisors. "You have a market that is trying to get a sense of what valuations should be in a higher interest rate environment. Every piece of economic news that comes out changes that expectation at the margin, and the market needs to understand that.
Markets opened Friday's session lower, heading for a week that could end in the red.
The richest man on the planet, Elon Musk, has acquired nearly 73.5 million Twitter shares in the last few days, representing 9.2% of the company's capital, making him the group's biggest shareholder. The purchase comes less than two weeks after Musk criticized the company, questioning people on Twitter about whether it adheres to the principles of free speech. "Given that Twitter acts as a de facto public square, its failure to adhere to the principles of free speech fundamentally undermines democracy," the Tesla boss had written on Twitter following the results. "Is a new platform necessary?"
The stock jumped 27% on Monday following the news. Twitter shares had posted losses of over 38% in the last twelve months as of Friday.
On Monday, Elon Musk launched a poll on the platform asking Twitter users if they want the edit option, a long-awaited feature the social media platform has been working on. It is still not possible on Twitter to correct a tweet following its publication, which enrages many of the platform's users. On Tuesday, Twitter executives announced that Elon Musk was joining Twitter's board of directors.
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