There was mixed news on the markets as Wall Street began its second quarter. While the Dow Jones Industrial Average was up 100 points at the end of last week, there were warnings from the Treasury that economic growth would slow. This meant that this week started with futures on the S&P 500, Nasdaq 100 slipping while there were also declines in the stock price of several banks and car manufacturers.
The first quarter of 2022 was Wall Street’s first negative quarter in two years and there were fears that this would continue after a recession signal from the bond market was issued late last week. This saw the two-year and 10-year treasury yields inverting for the first time since 2019. Such news combined with the expectations that there would be significant interest rate rises in May from the Federal Reserve to counter inflation.
However, the markets evidently shrugged off such concerns following the warnings with the S&P 500, Nasdaq Composite and Dow Jones all making late gains on Friday. Much of this was due to President Biden’s commitment to release more oil reserves which brought the price of West Texas Intermediate down below the $100 per barrel mark. This was to counter the skyrocketing cost of energy that has been exacerbated since Russia’s invasion of Ukraine.
Many other areas on the markets performed well on Friday, with utility and energy stocks gaining ground while the gold mining brand Newmont saw a rise in value of over 4%. The biotechnology company Illumina saw similar rises, while Walmart jumped 1%. However, both the equity and bond markets issued conflicting signals about the economic outlook as investors sought to make sense of a complex global market situation.
Mixed messages on the markets
The mixed picture on the markets reflects an overall mood of uncertainty about which way the US economy would move this year. While the official jobs report for March showed that there were 431,000 payrolls added, it was still below some of the market estimates. While the figures could be seen as negative for some analysts, they must be taken in context against the general economic backdrop.
Last week also saw similarly gloomy figures being released about construction spending data and manufacturing data. Such concerning data was mirrored in various market sectors such as bank stocks that had a difficult Friday, while the stock price of chip manufacturer Intel dropped just short of 3% amid fears about a lack of demand for personal computers.
While few analysts are expecting too many positives to emerge from the second quarter of 2022, it’s hoped to be an improvement on the first quarter. This saw the Nasdaq falling over 9% and both the Dow and S&P 500 dropping between 4 – 5% over the first three months of the year. All of which means that the anticipated cycle of interest rate rises and high inflation could mean yet another tricky period for the stock markets.