Weekly market update - 28th of April 2022
Written and accurate as at: Apr 28, 2022 Current Stats & Facts
FIVE factors combined to drag down equity and bond markets last week, while commodity prices also fell:
- Further signals of aggressive Fed tightening, which saw US two-year government bond yields rise 21bps
- Concerns over Chinese economic growth with the Shanghai stock market and yuan both falling sharply
- Fears that supply chain problems will re-emerge as a result of Chinese lockdowns
- Some fear a slowing US economy
- Selective US earnings disappointments – primarily from Netflix and Alcoa.
The combination of factors meant technology and cyclical sectors were both affected. The S&P 500 fell 2.7% last week and is now down 10% year to date. The NASDAQ lost 3.8% last week and is down 17.8% for the year. The S&P/ASX 300 (-0.7%) held up better and up 1.8% for the year.
Last week saw two high-profile disappointments which dragged on sentiment:
Netflix: The US$100bn cap stock fell 38% in a week. Several issues (such as switching off the Russian subscriber base) were specific to the company, but they exacerbated market concerns regarding consumer demand. Combined with other problems outlined above, this seemed to be a negative catalyst for mega-cap growth names, which have previously supported the market.
Alcoa: The alumina and aluminium producer fell 23% on concerns regarding costs – particularly around energy which is a significant input into the refining and smelting process. The broader growth outlook compounded this.
Interestingly, despite a few significant disappointments, aggregate revisions to Q1 FY23 have been positive, reflecting what remains a strong economy. For example, US airlines see substantial upgrades. At this point, earnings remain supportive of markets.
The local market was helped by the private equity bid for Ramsay Health Care (RHC, +30.6%). This supported the health care sector. Other than this, defensive sectors outperformed. Mining was weak on a series of disappointing quarterly production reports. Costs and production were both disappointed, mainly due to the disruption associated with Omicron.