- US equity indices were mixed on Friday, with the S&P 500 slightly lower on the day, just below 4,500.
- Meanwhile, the Dow gained around 0.5% and the Nasdaq 100 fell another 1.2%, reflecting rising US yields.
Major US Stock Indices were mixed on Friday, with the S&P 500 ending the session unchanged near 4,500, the Dow gaining around 0.5% to trade near 34,750 and the Nasdaq 100 Index losing around 1.5% to fall to fresh weekly lows of 14,300. where he was testing his 50-day moving average. All major indices ended the week in the red, though the Dow was down just 0.1%, versus losses of more than 1.0% for the S&P 500 and nearly 3.5% for the Nasdaq 100.
The main driver of the divergence in performance between the Dow and the Nasdaq on the last day of the week, and indeed the week as a whole, has been the sharp rise in US bond yields amid the recent Aggressive rhetoric from the Fed. US 10-year bond yields rose 30bps on the week to close above 2.70% as traders increased their bets on where the Fed’s terminal rate will be. The effect on stocks is that stocks with a higher “opportunity cost” to hold—that is, those whose valuation is based disproportionately more on expectations of future earnings growth than current earnings—perform worse. .
These are disproportionately tech stocks that crowd the Nasdaq 100 and also dominate the S&P 500. Meanwhile, stocks with a positive correlation to interest rates, such as financials, have fared better. Indeed, the S&P 500 GICS financials sector was up 1.2% on Friday, the second-best performing sector of the day after Energy, which was up nearly 3.0%.
While geopolitics remains in the spotlight, Fed policy has once again taken center stage as the dominant stock market theme, and this will continue to be the case next week with investors briefed on the latest Fed readings. US consumer and producer price inflation. Next week will also see the unofficial start of the 2022 first quarter earnings season as the big US banks start reporting figures.
Technical levels
Source: Fx Street
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