Dow +0.80%, S&P 500 +1.17%, Nasdaq +2.05%, Russell 2000 +1.02%, SOX +2.01%, Eurostoxx +0.44%, SMI +1.02% .
Wall Street seems to be doing better, it’s spring and many signals are turning green. The week, already good at the beginning of Friday, ends on a bullish note. It’s Three Witches Day in midtown Manhattan, options and futures are expiring, volatility has picked up at the usual time, not this Friday, VIX fell 7% to 23.87. This is probably one of the main points to make: volatility is in the process of retiring. The VIX traded at 37.52 on March 8 and closed at 23.87 on Friday. A return to the 20-15 zone is quite possible, given the state of the market. Thus, the main US stock indexes managed to close 4 sessions in a row. Over the week, the S&P500 (SPX) rose 6.16% and the Nasdaq100 (NDX) gained 8.41%. In Europe, the Eurostoxx 50 rose by 5.85% and SMI by 6%. This is the best week for stocks since November 2020. In terms of sectors, we are clearly looking for good old tech stocks last week, with growth stocks outperforming value stocks by 4%. Friday is no exception, FAANG is back in style, and the SPX podium consists of the Consumer Discretionary, Technology and Communication Services sectors.
As a side note, tech giants Microsoft, Apple, Amazon, Nvidia, and Tesla are responsible for 30% of SPX gains last week, good old days… SPX is now trading 1% above where it was the day before. Russia invaded Ukraine. The bulls are starting to believe it again, it has not escaped them that the flagship Wall Street index ends the week at 4463 points, its 200-day moving average is currently developing at 4470! Watch out for potential short coverage if the 200-day period is broken… Meanwhile, the NDX is ending its week on almost a 50-day chart, so the technical analysis lines are moving as well.
As we can see, the mood of the market participants improved significantly last week. The Fed went there, trying its best to convince us that the American economy is doing well, and gave a more hawkish signal than expected. In the market, we suddenly tell ourselves that everything should be fine, that this damned inflation will see what it will see, and that the boat of growth will weather and weather the storm without running aground on a stagflation reef. At the same time, the Chinese government’s commitment to propping up its economy and its stock market is certainly doing a lot of good. This can be seen by looking at the weekly dynamics of Chinese Internet shares listed on the NYSE. KWEB ETF soared 28.63% in a week. It has yet to climb 238% to return to its February 2021 high, which could also encourage many to be optimistic. In the capital flow register, we can see that $25.42 billion entered the stock market last week, it’s been 5 weeks since we saw it. Oil, which fell last week, is also a factor to consider. Finally, it can’t hurt that Chinese President Xi Jinping assured his US counterpart Joe Biden that China doesn’t want a war in Ukraine.
So, of course, we can’t ignore that damned yield curve, which reminds us time and time again how much the bond market is concerned about the real state of America’s economic growth. The US curve continues to flatten and we are even seeing intrusions into the inverted territory in the 5/10 year and 3/5 year portions, incursions are being contained for now. Meanwhile, 10-year bonds are not moving as much, gaining 2.18% this morning.
Joe Biden will meet today with the leaders of France, Germany, Italy and the UK to coordinate the response to the war in Ukraine. Kyiv rejects Moscow’s ultimatum to surrender Mariupol. All armed formations must leave the port city by 10:00 CET, the TASS news agency reported. Further talks between Ukraine and Russia are expected after Turkey said both sides were making progress. China says it will “do everything” to defuse the war. An energy crisis in Europe is on the agenda this week in Brussels, but government leaders may be reluctant to endorse intervention in the wholesale energy market as states are divided over better, more efficient options.
In the macroeconomic menu of the day, the Chicago Fed activity index is expected at 13:30. Christine Lagarde is due to give a speech around 3:30 pm.
Santander: Jeffries is moving from holding to buying, targeting €3.80. Hennes & Mauritz: JP Morgan is moving from overweight to neutral as it targets 180 SEK. Holcim: Citigroup resumes monitoring of the purchase, targeting 64 francs. TotalEnergies: HSBC buys to keep stock at €51.40. Volkswagen: Jefferies still lagging behind, target price reduced from 170 euros to 130 euros. Zur Rose: Jefferies remains long with target price cut from 515 to 290 francs. The President of Ukraine condemns the continuation of Nestlé’s activities in Russia. “We have significantly reduced our activities in Russia. We have suspended all imports and exports there, except for vital products,” TNK replies. Severin Schwan is stepping down as director of Credit Suisse. Microsoft has been attacked in Europe by three companies, including OVH, for anti-competitive practices regarding its cloud offerings. General Motors will buy Softbank’s stake in Cruise for $2.1 billion. The listing of China Evergrande Group and its subsidiaries has been suspended in Hong Kong.
In Asia this evening and this morning, indices are trading slightly lower. Tokyo is closed, Hong Kong returns 0.87%, Shanghai develops around the balance, and Seoul loses 0.77%. SPX futures are returning 12 pips and Europe is in balance at the 9 am open. The rise of a barrel of oil to $108 (WTI Light Crude) coupled with the lack of monetary stimulus in China caused some caution on Monday morning. Commodities are on the brink again, with rumors of a discussion of an embargo on Russian oil between Western countries, as well as Australia’s decision to ban aluminum exports to Russia. The dollar is stable, the EUR/USD pair is trading at 1.1054, gold is trading at $1923 per ounce. Some concerns, sure, but market sentiment seems to be much better on Monday morning.