Markets in brief
After closing last week's trading up, the three main indices once again closed in the green on Monday. Investors were delighted by the latest talks between Ukraine and Russia, as the latter hinted at the possibility of Ukraine joining the European Union as long as it did not join NATO. The Dow ended the session up 0.27%, the NASDAQ gained 1.31%, and the S&P 500 gained 0.71%.
Bond yields, which had been rising since early March, fell on Monday from 2.55% to 2.46%, while the volatility index dropped below 20 points for the first time since January.
Wall Street ended Tuesday's trading session higher for the fourth consecutive day. The Dow ended with gains of 0.97%, its tenth rise in twelve sessions, while the S&P 500 advanced by 1.23%. The NASDAQ gained 1.84% as the majority of its major companies ended the session higher.
Several stocks posted gains on Tuesday, including Rivian (+17.18%), Peloton (+10.05%), Uber (+6.96%) and Robinhood (+24.20%).
Talks between Ukraine and Russia continued on Tuesday, as a possible meeting between Ukrainian President Volodymyr Zelensky and Russian President Vladimir Putin could become a possibility in the coming days.
Investors were still keeping a close eye on the bond market. The 2-year US Treasury yield briefly exceeded the benchmark 10-year US Treasury yield for the first time since September 2019.
"While I believe the end result of an aggressive Fed tightening cycle is a recession, I don't expect it to happen quickly. Historically speaking, all recessions are preceded by 2s10s inversions, but not all inversions lead to recessions. There have been more inversions than recessions. The inversions that precede recessions do so around 13 months before the recession, and the recession generally doesn't begin until the Fed has completed its hiking cycle and the yield curve has begun to steepen again. If the timing is similar to that of history, the recession will start around the same time next year," argues Ellis Phifer, Managing Director at Raymond James.
After five good sessions, the indices returned to the downside on Wednesday, largely due to fading hopes of an end to the conflict between Ukraine and Russia. "The turn of geopolitical events has weighed on risk appetite as the US and its allies are skeptical about Russia's commitment to reduce military activity near Kyiv, as indicated," revealed analysts at Wells Fargo in a note. "Moscow has also failed to report any breakthroughs in the latest round of ceasefire talks," they added.
The Dow ended Wednesday's session down 0.19% at 35,228.81 points, the NASDAQ was down 1.21% at 14,442.27 points, while the S&P 500 gave up 0.63% at 4,602.45 points.
"We're skeptical about getting ahead of the curve on hope," Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management, told Bloomberg TV. "While we're comfortable with the amount of liquidity available and the desire to buy on the downside after seeing a correction in the S&P 500 and a bear market in the Nasdaq, the reality is that risk has fundamentally increased, whether you're talking about geopolitical or fundamental risks. We continue to warn people about the vulnerability of earnings here."
Lululemon shares jumped 9% following better-than-expected quarterly results, announcing profits and revenue above expectations.
On the heels of its upbeat quarterly results, microprocessor manufacturer Micron Technologie was down 3.52%, while competitors such as AMD (-3.25%) and Nvidia (-3.37%) were also down.
All three major indices ended Thursday's trading session lower, with the Dow down 550.46 points, the S&P 500 losing 1.57% and the NASDAQ down 1.54%. The indices began to tumble in the final hour of trading, as Thursday marked the last day of the month and the first quarter of the year.
For the first quarter, the Dow ended with losses of 4.6%, the S&P 500 4.9%, and the NASDAQ 9%. However, March turned out to be a positive month, thanks to the solid recovery of the last two weeks. The S&P 500 and Nasdaq rose by over 3% in March, and the Dow gained 2.2%.
Markets opened higher on Friday, with the Dow gaining 0.03%, the NASDAQ advancing 0.5% and the S&P 500 adding 0.4%.
Oil
The energy sector was the big loser on Monday, as oil prices fell by 6%. Chevron lost 1.8% and Exxon Mobil fell 2.8%. The announcement of further confinements in China put pressure on prices as the city of Shanghai is currently experiencing a major outbreak of COVID. With a population of over 25 million, Shanghai is one of the country's major economic centers.
"Even though these confinements are only scheduled for four days, they are very broad and there is great concern that these measures will spread and weigh on oil demand," Andy Lipow of Lipow Oil Associates told AFP. China is continuing with its zero COVID policy and will continue to confine cities if cases continue to rise, adding to concerns about demand for black gold.
"Chinese oil demand is expected to be 0.8 million barrels per day lower in April than normal, due to ongoing confinements that could affect more than 200 million people," said Bjarne Schieldrop, analyst at Seb.
Oil prices continued to fall on Tuesday, losing more than 5% by midday. Brent North Sea crude finally closed down 2%, while WTI was down 1.62%. "Fundamental investors withdrew from the black gold market due to extremely high volatility, leaving key market players to traders seeking to hedge geopolitical risks," said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.
Oil prices continued to fall on Thursday following President Biden's announcement that one million barrels would be injected daily over the next six months, or more than 180 million barrels, "to increase supply [...] until production accelerates later this year".
On Thursday, WTI ended the session down 6.99% at $100.28, while Brent North Sea crude was down 4.88% at $107.91.
"If history is anything to go by, strategic oil reserves have a short-term easing effect on prices, which is then followed by a rebound to higher levels, as additional barrels are a quick fix that don't solve the long-term supply deficit," moderates Ipek Ozkardeskaya, analyst for Swissquote bank.
OPEC and its allies have reiterated that they will maintain their timetable for gradual production increases despite the current crisis in the oil sector. According to a statement, the cartel said it would go ahead with the 432,000 barrels per day supply increase planned for May, at an online meeting on Thursday.
Tesla
The company announced on Monday that it would seek the approval of its shareholder council to increase the number of its outstanding shares, with a view to subsequently splitting them. The company had taken the same step in 2020, splitting its share by five, making its stock more accessible when it was trading at $1,500 at the time. "Tesla's Board of Directors has approved management's proposal, but the stock dividend will depend on the Board's final approval," the document states.
"We view Tesla's move after Amazon, Google, Apple and the launch of its second stock split in two years as a smart strategic move that will be a positive catalyst for stocks going forward," writes Wedbush Securities analyst Daniel Ives. He values Tesla shares as the equivalent of a buy with a target price of US$1,400.
Over the past two years, Apple (AAPL.O), Nvidia (NVDA.O) and Tesla (TSLA.O) have also split their shares.
For their part, Amazon (AMZN.O) and Google-parent Alphabet (GOOGL.O) have announced that they will begin the process. This allows the companies to sell their shares at a lower price, attracting more investors without altering the total value of their company.
Tesla closed Monday's session up 8%, but as of last Friday, its stock had accumulated losses of 4% since the start of the year. Its shares jumped 49.8% in 2021 and 743.4% in 2020, while its market capitalization stands at over $1,000 billion.
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