Last Week In Review April 15, 2022

April 18, 2022

Last Week In Review

Last week the indexes ended mixed over a holiday-shortened week, which saw the release of the first major corporate earnings reports of 2022. Value stocks continued to outperform their growth counterparts, but small-caps regained ground lost the previous week on large-caps. Financials lagged within the S&P 500 Index, dragged lower by JPMorgan Chase after the banking giant missed Wall Street’s estimates. Energy shares outperformed. The market was closed Friday in observance of the Good Friday holiday, and traders observed below-average trading volumes for much of the week.

Anticipation of a sharp deceleration in earnings growth appeared to be one factor weighing on sentiment. In contrast to recent quarters, analysts polled by FactSet have been lowering their earnings estimates. They expect profits for the S&P 500 to have grown in the mid-single-digit percentages over the year before—the slowest pace since late 2020. However, as FactSet notes, companies typically exceed analyst estimates by some margin.

US – Markets & Economy

Inflation data and how price pressures would impact corporate margins also seemed to be in the spotlight. Producer price inflation data out of China over the weekend weighed on sentiment before trading began on Monday, while Chicago Federal Reserve Bank President Charles Evans, historically considered “dovish,” said at an event in Detroit that he believes an accelerated pace of rate hikes worth debating.

On Tuesday, the Labor Department reported that headline inflation jumped 1.2% in March, bringing the year-over-year increase to 8.5%, slightly above consensus expectations and a new four-decade high. The core rate excluding food and energy prices rose only 0.3%; however, below consensus expectations of around 0.5%. Stocks initially rose on hopes that inflation might be peaking, but the rally was short-lived as crude oil prices rallied back through USD 100 a barrel after Russian President Vladimir Putin said peace talks with Ukraine are stalled.

Last week traders also observed increased dialogue in the market around the risk to consumer activity following the steep move in rates, which has materially increased the cost of financing larger-ticket items, such as houses, cars, recreational vehicles, and boats. Retail sales, which are not adjusted for inflation, rose only 0.5% in March, below estimates and at the weakest pace in 2022.

Further threatening corporate profits, core producer prices, reported on Wednesday, rose 1.0% in March, roughly double estimates, while February’s increase was revised higher. Over the previous 12 months, prices surged a record 9.2%.

US – Equity Market Performance

Index Friday’s Close Week Ending 4/14/2022 Weekly (+/-) Point Change 4/14/2022 % Change YTD Week Ending 4/14/2022
DJIA 34,451.23  -269.89 -5.20%
S&P 500 4,392.59  -95.69 -7.81%
Nasdaq Composite 13,351.08 -359.92  -14.72%
S&P Midcap 400 2,628.61  11.52 -7.22%
Russell 2000  2,004.98  10.42 -10.98%


US Yields & Bonds

The recent steepening of the U.S. Treasury yield curve continued over the week, with short- and intermediate-term rates retreating and long-end yields ticking slightly higher. (Bond prices and yields move in opposite directions.) Our traders reported that the softer-than-expected core reading in the March consumer price index (CPI) sparked demand for Treasuries—especially those with shorter maturities—and unwinding of curve-flattening bets by many investors.

For most of last week, the broad tax-exempt municipal bond market posted negative returns amid continued pressures from fund outflows industrywide. Municipals also lagged Treasuries as tax-free bond investors appeared reluctant to follow Tuesday’s relief rally in the U.S. rates market. Traders reported that several primary market deals were greeted with strong demand as the week progressed.

Corporate bonds experienced some weakness at the start of the week amid elevated new issuance and anticipation of March CPI data. Still, the softer core reading had a positive impact on sentiment. Later in the week, the market was mixed alongside periods of weakness in the equity markets. The issuance was in line with expectations during a front-loaded week in the primary market.

Traders also reported that the high-yield corporate bond market was down on lighter-than-average trade volumes. Broader risk assets continued to experience weakness with inflation risk and the ongoing conflict in Ukraine weighing on markets. No new deals were announced in the primary market.

The bank loan market saw somewhat light trading activity. Our traders noted that sellers of high-dollar loans looking to reinvest in cheaper high yield bonds drove much of the trading activity in the secondary market. Several new deals launched early in the week before primary market activity subsided ahead of the holiday.

US Treasury Markets – Current Rate and Weekly Change

3 Mth: +0.07 bps to 0.75%
2-yr: -0.06 bps to 2.45%
5-yr: +0.04 bps to 2.79%
10-yr: +0.13 bps to 2.83%
30-yr: +0.19 bps to 2.91%


Interesting News Overseas

European shares rose amid some relief that the European Central Bank (ECB) did not adopt a more hawkish stance at its policy meeting. The pan-European STOXX Europe 600 Index ended the holiday-shortened week 1.09% higher in local currency terms. France’s CAC 40 rose 2.11%, and Italy’s FTSE MIB advanced 2.66%, while Germany’s DAX Index added 0.62%. The UK’s FTSE 100 fell 0.79% as energy stocks weakened and the UK pound strengthened against the U.S. dollar. A stronger pound weighs on the index because many companies are multinationals with overseas revenues.

Core Eurozone bond yields were volatile and ended higher amid speculation around the ECB policy meeting. U.K. and peripheral eurozone bond yields broadly tracked core markets.

At its latest policy meeting, the ECB indicated that it would adhere to its earlier guidance for a steady withdrawal of stimulus, saying that recent economic data “reinforce its expectation” that its asset purchases should end in the third quarter. After the meeting, ECB President Christine Lagarde said that policymakers would “maintain optionality, gradualism, and flexibility in the conduct of our monetary policy.” She also said there was no clear timetable for raising interest rates after the program winds up.

National Rally Party leader Marine Le Pen and President Emmanuel Macron beat other challengers in the first round of the French presidential election and face each other in the second round on April 24. Macron won almost 28% of the vote, and Le Pen won slightly over 23%. Democratic-Socialist candidate Jean-Luc Mélenchon garnered 22%. Le Pen’s result and subsequent tightening opinion polls suggest she is the closest ever to winning power for the right in France.

Japan’s stock markets gained over the four days, with the Nikkei 225 Index rising 0.69% and the broader TOPIX index up 0.62% through Thursday. Bank of Japan (BoJ) Governor Haruhiko Kuroda asserted that Japan’s economy would continue to recover despite surging commodity prices. Still, he stressed that the central bank needs to maintain its massive monetary stimulus to support the still-fragile post-coronavirus recovery. The BoJ’s ultra-loose policy stance, in contrast to the tightening pursued by many other major central banks, has contributed to significant currency weakness—the yen hovered around its lowest levels in nearly 20 years against the U.S. dollar, finishing the period at about JPY 125.36, compared with JPY 124.30 at the end of the previous week. The 10-year Japanese government bond yield was unchanged at about 0.23%.

Japan’s producer price index, which measures the price of goods traded between companies, rose by 9.5% in March, following a 9.7% rise in February. The rapid increase was attributable to spiraling crude oil and commodity prices, partly due to supply constraints stemming from Russia’s war with Ukraine.

On the other hand, consumer price inflation remains subdued, underpinning the BoJ’s commitment to accommodative monetary policy in the pursuit of its 2% inflation target. However, Kuroda said that he expects the core consumer price index to rise and cautioned that “extremely high uncertainties” remain about how the situation in Ukraine will affect the Japanese economy. BoJ Deputy Governor Masazumi Wakatabe said that while Japan has yet to emerge from deflation completely, it is no longer suffering from sustained price falls. He reiterated that currency rates should move stably, reflecting economic fundamentals.

Lastly, the Chinese markets retreated in the week to Thursday as a surging coronavirus outbreak in Shanghai fueled concerns about supply chain disruptions. The broad, capitalization-weighted Shanghai Composite Index eased 0.8%, and the blue-chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, declined 0.92%.

On Thursday, Shanghai reported more than 27,000 coronavirus cases, a new record, as the city experiences its worst outbreak since the virus first emerged in Wuhan in 2019. Shanghai’s 25 million residents have been under lockdown since March 28.

Supply chain paralysis gripped parts of China’s manufacturing sector, as many cities reimposed restrictions to quash the virus. Tesla, Volkswagen, Bosch, and domestic automakers Nio and SAIC Motor are among the companies that suspended production. More than 30 Taiwanese companies, many making electronics parts, have stopped production in eastern China. China’s President Xi Jinping said that the country must not relax control and prevention measures in response to the growing outbreak.

These measures will likely continue to add to global inflationary pressure as many of China’s supply chain comes to a grinding halt.

This Week Ahead

The U.S. earnings season enters an active phase with Bank of America, J&J, IBM, Netflix, Procter & Gamble, Tesla, United Airlines, AT&T, and American Express due to report. General forecasts point to a nearly 5% annual earnings growth this reporting season. Traders will also keep a close eye on speeches from several Fed officials, including the appearance of Fed Chair Powell at the Volcker Alliance and Penn Institute for Urban Research Special Briefing and the IMF Debate on the Global Economy, both on Thursday. On the economic data front, flash S&P Global PMIs will update the business activity in April. Other releases include the Philadelphia Fed Manufacturing Index and several housing indicators – the NAHB housing index, housing starts, building permits, and existing home sales.

Have a great week.

Stephen Colavito

Stephen Colavito, Jr.
Chief Investment Officer
Perigon Wealth Management, LLC

D,M: 404.313.1382

This message is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell securities or other financial instruments. Past performance is not a guarantee of future results. Perigon Wealth Management is a registered investment adviser. More information about the firm can be found in its Form ADV Part 2, which is available upon request by calling 415-430-4140 or sending an email request to

Written by Perigon Wealth

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