Hey Folks, what a strong finish to this week’s market action. Weekly record price performance moves markets dramatically higher. Get me take on this large move and what is in store in the coming weeks.
WEEKLY SOUND BITES:
Drop a ball off a balcony and it will bounce. Drop the markets from all-time highs it eventually will as well. Now, can it last and more upside is in the forecast? Equity markets moved higher for the week, ending a two-week losing streak and reclaiming much of the ground lost over the past month. The DOW rose 5.5% snapping a 5-week losing streak while the S&P gained over 6.2%. And NASDAQ rose 8.2% on the week is its largest weekly gain on record. Markets were supported by multiple factors, including falling oil prices, news that Russia had avoided defaulting on its sovereign debt, and the outcome of the Federal Reserve’s monetary policy meeting. We’ve seen the 50 EMA moving below the 200 EMA (called a death cross. Dow Jones Market data says that in 53 death-cross episodes, the average gain is 6.3% looking out over 12 months.
Economic data seemed to have a limited impact on markets. February retail sales were disappointing, although the January numbers were revised upward. Continuing claims for unemployment insurance fell to a 52-year low, showing continued strength in the labor market. In a possible sign of peaking inflation, the headline producer price index (PPI) decelerated during the month of February and the gain in core prices held steady with January’s pace. Meanwhile, mortgage rates in the U.S. soared, surpassing 4% for the first time in almost three years.
As expected, the Fed raised its short-term lending rate by 25 basis points at its March meeting (first rate hike since 2018), moving the fed funds target rate from near zero to a range of 0.25% to 0.50%. The Feds also released an updated economic forecast, which showed they are expecting to raise rates seven times in 2022. U.S. Treasury yields shifted higher in response to hawkish signals from the Feds. Yield increases were most notable in shorter-maturity Treasuries, which are generally more sensitive to changes in monetary policy. And the flattening of the Treasury yield curve continues.
The BoE raised interest rates to 0.75% from 0.50%, aiming to curb inflation that it now expects to reach 8% by the end of June. However, their message appears to have become more dovish because of the potential real economy effects of the Ukraine conflict. Meanwhile, the ECB President Christine “Queen Bee” Lagarde appeared to strike a more bearish tone since last week’s policy meeting.
Japan’s stock markets registered five consecutive days of gains finishing the week 6.62% higher. Sentiment was supported by the Bank of Japan’s (BoJ’s) continued commitment to its dovish stance amid a global shift toward tighter monetary policy. The BoJ maintained its short-term policy interest rate at -0.1% and its target for the 10-year JGB yield at around 0%. It will continue with quantitative and qualitative monetary easing.
Chinese officials said they would introduce market-friendly policies and keep the capital market running smoothly. In economic news, China reported better-than-expected activity in the January-February period with help from policy easing measures and the easing of power and chip shortages. Industrial output rose 7.5% in January-February from a year earlier, the fastest pace since June 2021
Enjoy This Weeks Market Round-Up:
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
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