US weekly: All of the major indices finished their best week since November 2020
The US market posted its first weekly gain in three weeks, and its biggest since November 2020, rising more than 6% since last Friday. The Fed's decision of rate hike was taken positively by the market. The crude oil has corrected significantly this week.
On Monday, the US market started the important week in the red. The oil prices fell sharply, and traders monitored the latest development between Russia and Ukraine. Investors expected a first-rate hike by the Fed later in the week. The US Treasury yields reached their highest level since July 2019.
The US market increased sharply on Tuesday as the crude oil fell below $100 per barrel and the lighter-then-expected inflation data. The technology stocks bounced back supported by chipmakers. The tech-heavy Nasdaq Composite jumped 2.9% due to the strong performance of large-cap technology stocks.
On Wednesday, the central bank announced an interest rate hike of 25 bps. The US market cheered the decision as the hike was in-line with expectations. The central bank hiked interest rates for the first time since 2018. The crude oil price cooled down further and was below $95 a barrel.
The US stocks rallied for the third consecutive day on Thursday. Oil prices jumped back up over $100 a barrel. Investors turned their attention back to the war in Ukraine and its potential impacts on the global economy.
On Friday, the US stocks continued to rally for the fourth consecutive day. The US crude oil prices rose above $104 per barrel, while the 10-year Treasury yield declined but held above 2.1%. For the week, S&P 500 gained 6.2%, Dow Jones up 5.5% and tech heavy Nasdaq up 8.2%.
Let’s see the major developments during the week:
Federal Reserve rate hike - The US Federal Reserve has raised the interest rates by 25 basis points in line with the market expectation. It expects to raise rates at each of its remaining six meetings this year, and it is expected the rate will end 1.9% by the end of the year. It expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting. Check our detailed report here.
Growth projections - The high and rising commodity prices are giving tough times to the consumers by bringing down their purchasing power. However, the Fed has projected that the US economy will grow at an above-average pace this year. It projects GDP to grow at 2.8%. It is lower than the estimate from just three months ago but still significantly above the last decade’s 2% average.
Update on controlling inflation - The Fed aims to bring inflation closer to its 2% target without slowing the economy too much over the next three years. Inflation (core PCE) is expected to be at 4.1% this year, up from a 2.7% projection in December. By 2023, inflation is estimated at 2.6%, up from an earlier forecast of 2.3%.
Other macroeconomic updates: February retail sales were disappointing compared to January numbers which were revised upward. Continuing claims for unemployment insurance fell to a 52-year low, showing continued strength in the labour market. Mortgage rates in the U.S. soared, surpassing 4% for the first time in almost three years.
Crude oil price - Oil prices posted a second straight weekly loss, after a volatile trading week with no easy replacement for Russian barrels in a tight market. On Friday, Brent crude futures settled up $1.29, or 1.2%, to $107.93 a barrel. On Thursday, it surged nearly 9% in the biggest daily percentage gain since mid-2020.