U.S stocks ended mixed on Friday, with all three major stock indexes posting losses for the week. This week the Dow Jones fell 0.27%, the Nasdaq fell 3.86%, and the S&P 500 fell 1.26%. Investors continued to price in the prospect of aggressive rate hikes by the Federal Reserve and a start to shrink its balance sheet. Economists again raised their inflation forecasts in the U.S while lowering their growth forecasts. The situation in Russia and Ukraine and its impact on global inflation remains a concern.
Since hitting a two-month high in late March, the market has been on a downtrend as investors reconfigured their portfolios as the Federal Reserve signalled a sharp rate hike. Erika Najarian, an analyst at UBS Bank, said investors were weighing two possible outcomes of the economic downturn. Shares are “severely oversold.” Another scenario is that the economy will soon slow down sharply, which will lead to a knee-jerk sell-off in bank stocks because holding bank stocks in a recession is not a good idea.
Big U.S banks will kick off their first-quarter earnings season next week and are expected to report a sharp decline from a year earlier when they benefited from unusual strong mergers and deals.
On Thursday, Tesla (NASDAQ: TSLA) held the open ceremony for its Gigafactory in Austin, Texas. It took the company about two years to build the Austin plant, with a total investment of $1.1 billion. Tesla CEO Elon Musk said at the ceremony the factory's capacity target is to produce 500,000 Model Y vehicles a year. In addition, Musk also mentioned new ideas, saying that Tesla will produce a dedicated robotaxi in the future.
To keep its supply chain running smoothly, Walmart (NYSE: WMT) is raising the starting salary for its truck drivers to between $95,000 and $110,000 a year, up from the previous average of $87,000. It is reported that Walmart has hired 7,000 truck drivers for its internal fleet in the past two years. Last year, the number was as high as 4,500, which was the largest number of drivers in the company's history. In total, the company currently employs about 12,000 truck drivers.
TSMC (NYSE: TSM) disclosed its financial data for March this year, achieving total revenue of TWD$171.967 billion, a year-on-year increase of 33.2%, setting a new record for the same period in history and the second-highest record in a single month in history; Monthly data, TSMC achieved total revenue of TWD$491.076 billion, a year-on-year increase of 35.5% and refreshed the company's quarterly revenue data.
Macroeconomic concerns resurfaced this week, weighing on risk assets including cryptocurrencies. The top cryptocurrency bitcoin (BTC) is trading at $42,400 at press time, down 8.9% for the week. Ethereum (ETH) is trading at $3,206.51, down 8.2% for the week.
The cryptocurrency's rising correlation with stocks means it could underperform traditional store-of-value assets such as gold in the coming months. In previous periods of stagflation, gold and oil have significantly outperformed the S&P 500, Wall Street's benchmark. History could repeat itself, drawing investors away from stocks, especially tech, and toward energy. JPMorgan analysts expect commodity prices to rise 40% in the coming months.
Legendary trader Peter Brandt tweeted that “Bitcoin will likely have to wait until 2024 to start a new crazy bull market.” Data given by him shows that Bitcoin's next crazy bull round may have to wait until May 2024. This is almost the same as the next Bitcoin halving progress. In the past two halvings, Bitcoin rose 10 times or more, and it took the cryptocurrency an average of 33 months to start a bull market. He explained in a tweet, “If history repeats itself, then the next A bull market will start in May 2024.”
Spot gold closed up 0.83% late on Friday at $1,947.35 an ounce, closing at the highest level in nearly two weeks, up 1.16% this week. The hawks of the Federal Reserve called for a faster pace of interest rate hikes and began to shrink the balance sheet as soon as possible to curb rapidly rising inflation. The surge in the U.S. dollar index suppressed the price of gold. Although the safe-haven demand caused by the conflict between Russia and Ukraine supported the price of gold, both bulls and bears were cautious.
At the close of the gold market, the yield on the 10-year U.S Treasury bond exceeded 2.7%, and usually rising Treasury yields put downward pressure on gold prices. The ICE U.S. Dollar Index (DXY), which measures the currency against a basket of six major rivals, edged higher, with the index up 1.3 percent for the week. A stronger U.S dollar could be bad for dollar-denominated commodities like gold, which makes gold more expensive for users of other currencies.
Market analyst Craig Erlam said gold futures prices on Friday were largely unchanged from the past few days. While volatility in other markets soared due to a hawkish shift in the Fed's monetary policy stance, gold was unaffected. The volatility was significantly smaller than last week, and the cumulative fluctuation range was only $10.
WTI May crude oil futures closed up 2.32%, at $98.26 per barrel, down 1.02% for the week. Brent June crude oil futures closed up $2.20, or 2.19%, at $102.78 per barrel. It fell 1.54% for the week.
U.S oil continue to fall for a second week after countries announced plans to release strategic oil reserves. Benchmark crude has been in its most volatile state since June 2020 for weeks.
Members of the International Energy Agency (IEA) will release 60 million barrels of oil reserves over the next six months, and the United States will also release 60 million barrels of oil, as part of the release plan for the 180 million barrels of oil the United States announced in March.
Even if oil prices are around $100 a barrel, the release of emergency oil reserves could stop shale oil production including those from the Organization of the Petroleum Exporting Countries (OPEC) and the United States Manufacturers, analysts said.
The Iraqi state news agency quoted the oil ministry on Friday as saying that OPEC+'s commitment to output targets would help absorb excess supply in the market. OPEC+ is an alliance of OPEC and oil-producing allies led by Russia.
German Chancellor Olaf Scholz said on Friday that Germany may stop importing oil from Russia this year.
The U.S. dollar index posted its biggest weekly percentage gain in a month, supported by expectations the Federal Reserve could tighten monetary policy further to stem a spike in inflation. The index also rose to 100 for the first time in nearly two years. The dollar briefly rose to 100.19, its highest level since May 2020. It was little changed on the day at 99.84, up 1.3% for the week.
The U.S. dollar has risen strongly against six currencies over the past few months, especially against the euro. The euro was under pressure as investors worried about the economic cost of the war in Ukraine and possible tensions from the French presidential election. Minutes of the Fed's March meeting released this week showed many policymakers at the meeting preparing to raise interest rates by 50 basis points in the coming months.
While the dollar rose, the euro fell to a one-month low of $1.0837. It was last down 0.05% at $1.0874, with the euro falling for seven straight sessions. Minutes of the European Central Bank's meeting on Thursday showed policymakers were keen to take action to fight inflation, but the euro zone's strategy so far has been more cautious than other central banks, which has weakened the euro. The narrowing gap in approval ratings between French President Emmanuel Macron and far-right candidate Marine Le Pen has added to pressure on the euro.
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