US market weekly: S&P 500 recedes from highs as Fed's move, Covid fears weigh

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US market weekly wrap

The US market started off the week with a pullback on Monday, receding from record high levels. The US market had posted its best weekly gain since February, in the previous week.

U.S. stocks fell on Tuesday as some large tech stocks declined as inflation data showed a further rise. Investors were also cautious ahead of the Fed Reserve's monetary policy meeting scheduled on Wednesday. 

The markets reversed losses and moved higher on Wednesday as the investors got past one of the big uncertainties around Fed’s move. Fed announced it would scale down its asset repurchases at a faster rate to combat rising inflation.  

On Thursday, the market went back to posting losses dragged by Technology companies. Analysts point out that investors are concerned that the upcoming  rate hikes due to tightening monetary policy will reduce the appeal of the highly valued stocks, leading to sector rotation out of Tech.  

Dow Jones came under pressure again in Friday’s volatile session amid worries about tighter monetary policy and the concerns around rising Covid cases. For the week, Dow Jones lost 1.7% while the S&P 500 shed 1.9%. Tech-heavy Nasdaq lost nearly 3% during the week. 

Weekly market stats with IND

Let’s see the major developments during the week:

Fed Monetary Policy action: Fed announced that it will be buying back $60 billion bonds per month in January, from $90 billion in December. This has set the stage for an end to the pandemic-driven easy monetary policy seen so far. The Fed’s quarterly survey of individual policymakers’ views, released Wednesday, showed that a majority of officials now expect three quarter-point hikes in 2022 instead of two. The Fed’s move comes after the inflation surged to a fresh record high of 6.8% in November. 

 Omicron spread continues: Omicron cases have already been found in 77 countries. In the US, the variant has now spread to 38 states, making up 3% of the reported cases across the United States. The 7-day average has risen to 1.24 lakh cases in the US, up 5.7% from the previous week. Around 61% of the country is now fully vaccinated. The overall number of Covid cases stands at 50.7 million. 

Impact on treasury yields: Treasury yields decreased on Friday morning as news surrounding omicron caused risk sentiment to weaken. The 10-year Treasury note yield fell below 1.40% for the first time in nearly two weeks. For the week, the treasury yields eased around 0.1% to 1.41%. 

Oil Markets: Oil prices fell on Friday and were also down for the week as surging cases of the Omicron raised fears that new restrictions may lead to reduced demand. For the week, Oil prices closed nearly 2% lower.