US market: Indices end week with heavy losses as inflation, crude oil and geopolitical tensions weigh

US market weekly wrap

U.S. markets started off on a weak note, as huge declines in mega-cap tech names such as Meta and Alphabet weighed on sentiments. Investors were also cautious ahead of key macroeconomic data to be released later in the week. 

U.S. stocks bucked the trend on Tuesday, with gains in cyclical and small-caps signalling improving investor confidence in the growth outlook. Dip-buying in some big tech names like Apple Inc. and Microsoft Corp. helped lift the tech-heavy Nasdaq 100. However, rising US Treasury yields rising to the crucial 2% mark kept the rally in check. 

The advance in U.S. stocks gathered pace as an easing in a Treasury yields provided respite to investor concerns about tightening monetary policy. The S&P 500 extended its rally on Wednesday, posting its biggest daily gains this month. Retreating  10-year U.S. Treasury yields boosted sentiments. 

U.S. stocks sank on Thursday, after inflation rising to a 40-year high in the US dampened investor sentiment. Treasury yields spiked higher amid fears that the US Federal Reserve would hike interest rates more aggressively to tame inflation.

Shares in Wall Street extended declines on Friday, as geopolitical tensions between Russia and Ukraine added to concerns.  The S&P 500 fell 1.9% and the Nasdaq 100 dropped more than 3%, with both benchmarks posting the biggest two-day slides since 2020. For the week, Dow Jones closed 1% lower, while the S&P 500 ended 1.8% lower. Tech heavy Nasdaq ended the week 2.2% down.

Weekly market stats with IND

Let’s see the major developments during the week:

Inflation rises to 40-year high: The Labor Department reported that the headline consumer price index (CPI) rose 7.5% over the year ended January, the highest in 40-years. This is greater than consensus expectations and its highest annual gain since February 1982. Core prices, which exclude food and energy purchases, rose 6.0%, the most since August 1982. Given the steep rise in inflation, investors are now bracing for a more hawkish stance from the US Federal Reserve. 

10-year treasury yields rise: The benchmark 10-year yield reached its highest level since August 2019, topping the closely watched level of 2% as investors priced in the likelihood of higher interest rates from the US Central Bank this year. Goldman Sachs now expects seven 25 basis point interest rate rises from the US Federal Reserve this year, up from its previous forecast of five. 

Crude oil prices rise: Oil rose for an eighth straight week as tensions between Ukraine and Russia sparked fresh concerns about tight global supplies.  The global benchmark rose 1.3% this week, touching $95 a barrel on Friday. Investors fear that a potential Russian invasion of Ukraine could not only disrupt crude supplies but also could spark retaliatory sanctions by the U.S. Oil prices have risen in recent weeks on speculation that demand will outpace supply as the global economy rebounds from the pandemic.