Week in Review: First Negative Quarter in Two Years

Week in Review: First Negative Quarter in Two Years

The S&P 500 eked out a 0.1% gain this week, on the heels of closing out the first negative quarter in two years (-4.6%). The Dow Jones Industrial Average decreased 0.1% while the Nasdaq Composite finished rose 0.7% and the Russell 2000 rose 0.6%.

From a sector perspective, the cyclical financials (-3.3%), energy (-2.4%), and industrials (-1.5%) sectors were the weakest performers, while the defensive-oriented real estate (+4.4%), utilities (+3.7%), and consumer staples (+2.3%) sectors outperformed with decent gains.

The first two days of the week saw a continuation of positive momentum — Apple (AAPL) was up for 11 straight sessions — amid reported progress in ceasefire talks. Stocks rallied even as the 2s/10s spread briefly inverted on Tuesday, which is viewed as a harbinger for a recession between 6-24 months after the inversion.

The market retraced those gains over the next couple of days, though, as Russia refuted progress in talks with Ukraine, the core PCE Price Index for February (+5.4%) rose to its highest level since 1983, the March employment report fueled expectations for a more hawkish Fed, and investors took profits and rebalanced for quarter-end.

The employment report showed decent jobs growth (over 400,000 for both nonfarm payrolls and private sector payrolls), a better-than-expected unemployment rate of 3.6%, and an expected 0.4% increase in average hourly earnings.

Following the report, the 2s/10s spread re-inverted amid concerns surrounding a Fed policy mistake. By week’s end, the 2-yr yield was up 14 basis points to 2.43%, and the 10-yr yield was down 11 basis points to 2.38%. The U.S. Dollar Index increased 0.2% to 98.56.

Oil prices fell 12.6%, or $14.29, to $99.54/bbl after the U.S. and other IEA nations said they will release oil from their strategic reserves to help alleviate gas prices. The U.S. plans to release one million barrels per day for the next six months. On a related note, OPEC+ agreed to increase its output targets by 432,000 barrels per day in May.

Source: Briefing Investor