US Market weekly: S&P 500 ended the week in a positive territory amid high volatility
On Monday, the New York Stock Exchange and Nasdaq were closed in observation of President's Day.
The US market fell sharply on Tuesday as investors monitored the increasing tension between Ukraine and Russia. The US market formally entered into the correction zone as the market closed more than 10% from its high.
The market continued to extend losses on Wednesday as both the S&P 500 and Dow hit their lowest settlements so far in 2022 as the hope of a diplomatic resolution deteriorated. With the war situation, investors were worried about Fed's action as Fed is prioritising bringing down inflationary pressures.
In the early trading hours of Thursday, the markets plunged by 2%. However, the market staged a massive reversal and all 3 indices ended higher. The 10-year U.S. treasury nearly erased a 12 basis point drop, its worst since November 2021 to yield 1.97%.
The US stock market rally continued for the second day on Friday as traders eyed the latest developments in Russia's invasion of Ukraine and the world's response. At the end of the week, S&P 500 rose by 0.8%, Nasdaq by 1.1% while Dow Jones down by 0.1%.
Let’s see the major developments during the week:
Increasing crude oil price - Crude oil price jumped to $100 a barrel for the first time since 2014, before settling at $94. A sustained spike in energy prices would add to the current inflationary pressures in the US, further hurting consumer confidence and leading consumers to cut back on spending.
Market volatility reaches two years high - The major indexes closed mostly higher after a holiday-shortened week of historic volatility sparked by Russia’s invasion of Ukraine. On Thursday, the Nasdaq Composite Index swung by 6.8%, the largest intraday range since the start of the coronavirus pandemic in March 2020. As one example of the volatility, Tesla added USD 100 billion to its market capitalization over the course of the day on Thursday but declined roughly 5.5% over the week as a whole.
US market entered into correction zone - On Wednesday, the S&P 500 Index hit 4,115, nearly 15% below its peak at the start of the year, putting it firmly in correction territory. Given the concerning geopolitical situation between Ukraine and Russia, there are fears that the US may enter the bear phase (fall more than 20%) in the near future. Check our detailed article on the impact of war on the US market.
Bond yield market - For much of the week, investors rushed into perceived safe havens, driving longer-term U.S. Treasury yields lower. Friday’s rally pushed the yield on the benchmark 10-year U.S. Treasury note slightly higher for the week. The high yield bond market struggled under the risk-off sentiment, but buyers who were looking to source high-quality BB-rated paper sought to take advantage of the weakness.
Macroeconomic update: The Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures price index, rose 5.2% over the year ended in January, up from the prior month’s pace and in line with estimates. Pending home sales tumbled to a nine-month low in January amid historically low inventory and eroding affordability in the housing market as mortgage rates rise.