Author: Yvaylo Andonov
Over the past week, Federal Reserve Chairman Jerome Powell has signaled the need for US interest rates to remain higher for a longer period of time. The speech dashed investors’ hopes for recent rate cuts, pushing up government bond yields, with the 2-year note above 5% for the first time since November. Rising bond yields along with escalating tensions in the Middle East weighed on capital markets.
Beyond the ocean the broad index
The S&P 500 marked five straight days in the red.
Overall, the S&P 500 lost 3%, marking its third consecutive negative week and its worst since late October last year. The tech Nasdaq impressed, down 5.5% to close with a loss for a fourth week in a row. This is the longest weekly losing streak since January 2022. With a minimal weekly gain of 0.01 percent, only the blue chip benchmark Dow Jones registered. Over the same period, the pan-European Stoxx 600 index lost just over a percent of its value.
Casinos’ biggest owner Las Vegas Sands fell more than 9 percent despite beating profit expectations as the weak performance of its Macau operations remained a cause for concern. Tesla shares fell to a 15-month low below $150. The drop came after investment bank Deutsche Bank downgraded shares of the electric vehicle giant, highlighting “significant risk”.
The news of expected significant staff cuts
in an effort to maintain profit margins also negatively affected the company. NVIDIA Corporation lost more than 10%, dragging down other big names in the technology sector. It was also the worst day for the company since March 2020.
Samsung Electronics surpassed Apple to become the world’s leading smartphone maker in the first quarter of 2024. Samsung regained the top spot, selling 60.1 million (20.8% market share) while Apple trailed with 50.1 million iPhone sales /17.3% market share/. The change in leadership was also reflected in the share price of both companies. While Apple is down 15 percent from its December peak, Samsung is on an upward trajectory, up about 11 percent from its quarterly lows in January.
United Airlines shares stood out among the few gainers. The airline’s market capitalization rose by more than 15 percent. The growth in travel in the first quarter had a favorable effect on the results. Shares of Paramount Global also added more than 13 percent. On the Frankfurt stock exchange, the sports giant Adidas recorded almost the same growth. Adidas surprised its shareholders with a very strong start to the new financial year in terms of both sales and profits.
The dollar index, which tracks the U.S. dollar’s performance against a basket of six other major currencies, rose to a five-month high of 106.51.
The US currency rose after strong economic data from the US
and warnings from the Federal Reserve that interest rates will stay higher for longer. A strong dollar has acted as a cold shower on attempts to rise in oil prices. A stronger dollar is putting pressure on crude oil demand, adding a currency-related premium for international buyers. Still, weekly losses for both oil grades were limited to 3 percent after Friday’s missile strikes in central Iran. Iran is the third-largest producer in the Organization of the Petroleum Exporting Countries, producing more than 3 million barrels per day of crude oil, and a full-scale war with Israel would likely hit global supply hard. Trading ended at a price for US light crude oil (WTI) of $83.14 per barrel. For the “Brent” variety, the price was 87.29 dollars per barrel.
For gold, last week was the fourth consecutive week of gains. For the five working sessions, it added about 2 percent to its price. Fears of worsening conflict in the Middle East fueled increased demand for the yellow metal. For a moment on Friday, spot prices rose to $2,417 an ounce. Futures for June delivery reached as high as $2,433.0 an ounce. The sharp rise in the dollar is currently not putting pressure on gold prices.
* The material is informative in nature and should not be considered as an offer to buy or sell financial instruments. Both the author and clients of the company he works for may own one and/or more of the securities discussed.
