US stocks posted a second straight weekly decline, with shares of major banks falling on Friday after disappointing results from JPMorgan Chase technology dimmed an already mixed outlook for US economy.
While the Nasdaq Composite and the S&P 500 ended the day in positive territory, two closely watched market indexes ended the week lower after five volatile trading days.
The S&P 500 index, which ended the week down 0.3%, last recorded two consecutive weeks of losses after the World Health Organization declared coronavirus variant Omicron a concern last year.
Friday’s volatile equities trade was accompanied by a relatively intense sell-off in the $22 billion Treasury bond market, as investors dumped US government debt.
Yields on the two-year note rose to 0.97%, the highest since February 2020, while the 10-year yield rose 0.08 percentage points to 1.78%. Yields are inversely proportional to bond prices.
The rapid rise in Treasury yields has created uncertainty in global financial markets, as investors begin to adjust portfolios for a world of tighter policy since Federal Reserve.
The swap market has rallied three to four times this year, with the benchmark federal funds rate expected later this year at around 1%.
“I think the market is currently pricing in the risk that the Fed presents in [December FOMC meeting] Minutes move earlier and faster. And that risk premium is being priced in,” said Priya Misra, head of global rate strategy at TD Securities.
Higher yields have begun to weigh on stocks, especially in high-growth but loss-making companies. The tech-heavy Nasdaq Composite, which ended the week down 0.3%, is down 5% since the year began.
In contrast, financial stocks largely bounced back as interest rates moved higher and investors clung to a story that the post-pandemic economic recovery will allow them to more easily shift the winning bets from the heavily boosted tech sector to the more cyclical business sector.
But that also changed on Friday, after JPMorgan said it won’t hit its key profitability target this year. Its shares fell 6%, the biggest daily drop in 19 months. The S&P financials sub-index fell 1% as American Express, Goldman Sachs and Morgan Stanley also came under pressure.
Disruption from the coronavirus, rising inflation and uncertainty about when price increases will peak have made economic trends more difficult to predict, analysts say .
US corporate earnings season kicks off next week, with many companies poised to report results for the last three months of 2021 and their outlook for next year.
Investors said they expected to keep a close eye on factors such as growing wage pressures, price inflation and a tightening labor market that are affecting their financial forecasts. how to operate.
Companies listed in the S&P 500 index are forecast to see annual earnings growth of about 22%, according to analyst estimates collated by data provider FactSet.
“If inflation goes higher then the real fear factor comes in,” said Aneeka Gupta, research director at ETF provider WisdomTree.
Data on Friday also showed that US retail sales fell 1.9% in December. The University of Michigan’s Consumer Sentiment Index down almost lowest in a decade, with survey respondents citing inflation as a more serious problem than unemployment. U.S. consumer prices rose at an annual rate of 7% last month, the fastest pace in nearly 40 years.