US weekly: All Major Indices ended sharply lower amid weak corporate earnings
The major US equity indexes ended the week lower. The week marked the start of the earning season, but most companies reported lower than expected earnings. The inflation continues to be of concern. The Fed's Chairman expected to go aggressive with the interest rate to stop rising inflation.
US stocks declined to close a choppy session slightly lower on Monday as investors returned from a holiday weekend. Treasury yields advanced, with the yield on the benchmark 10-year note holding above 2.8%. US West Texas Intermediate crude oil futures rose and extended last week's gains.
The market increased on Tuesday as traders navigated the week full of earning reports and kept a close eye on the interest rate. Bank stocks outperformed as rates move higher and regional and mid-sized banks reported earnings. The concern about the Fed’s next steps caused high volatility in the bond market.
The market was divided on Wednesday as traders and investors evaluated the first-quarter results. The Dow Jones was supported by strong earnings reported by P&G, while Nasdaq was dragged down by Netflix, whose share price fell by 35%. Treasury yield retreated Wednesday after touching 2.94%, its highest level since late 2018.
The market opened on a positive note but showed a sharp reversal on Thursday as a jump in Treasury yields offset the optimism coming from another batch of solid corporate earnings. The sell-off was broad, but some strong individual moves after earnings helped the major indexes from even sharper declines.
The stock market suffered its worst one-day loss since Oct-20 on Friday as the below expected corporate earnings and the prospect of rising rates spurred a wave of selling. The benchmark 10-year Treasury yield dipped slightly to around 2.9%.
Highlights of the week:
Quarterly results - Netflix fell 35% as the company reported a loss of 200,000 subscribers in the first quarter, its first reported subscriber loss in more than 10 years. Check the detailed report here. P&G reported better-than-expected results and hiked its full-year revenue guidance. Verizon reported a loss of 36,000 monthly phone subscribers in the first quarter, and the share price fell. Tesla shares jumped more than 3% after its first-quarter numbers beat analyst expectations.
Powell on interest rate hike - Federal Reserve Chair Jerome Powell indicated that aggressive increases in interest rates were needed to fight inflation. He said that 50 basis points will be on the table for the May meeting. Powell also disputed fears that the Fed’s rate-hiking cycle would risk pushing the economy into recession, citing the historically strong labour market.
The housing sector faces issues - Housing appears vulnerable to rising borrowing costs, with the average 30-year fixed-rate mortgage moving above 5%, from 3% six months ago. Existing home sales fell 2.7% in March, and mortgage applications dropped last week.