4th June – 10th June 2022 | Another week in the markets
|S&P 500||Nasdaq||VIX||DJIA||Russell 1000||NYSE|
|Nifty 50||Gold||Silver||Brent crude||USD-INR||EUR-INR|
This week policymakers around the world considered interest rate hikes to tame inflation, major US retailers warned against profit dips and inventory pileups, and several tech stocks received ‘sell’ ratings by analysts.
- Europe to hike interest rates in July to curb surging inflation
- Investigation against Tesla’s Autopilot system gets upgraded to an engineering analysis
- US’s major retailers see increasing inventories as customer demand slows
- European Parliament votes to ban the sale of new combustion engine cars by 2035
- Major tech stocks like Netflix tumble after receiving a ‘sell’ rating
Taking stock | Inflation rodeo | Test-la autopilot | Demand draught | PetrolEUm jelly | Netflux | Invest wisely
Wall Street dropped sharply on Friday as US’s inflation data release for May showed an 8.6% year-on-year increase. With data indicating higher-than-expected inflation, all major indices sank making it one of the stock market’s worst weeks in months. The Dow fell 4.58%, S&P sank 5.05%, and Nasdaq closed 5.60% lower over the week. While stocks suffered declines, the US index dollar gained nearly 1%. The consumer sentiment for June plunged to a record low as inflation continues to impact household finances.
The US is not alone in hiking interest rates in an attempt to curb inflation. Slowing growth, supply shocks due to the Russia-Ukraine war, rising oil prices, and more are impacting countries across the globe, forcing central banks to hike interest rates and tame surging inflation rates. This week the European Central Bank (ECB) confirmed that it plans to raise its key interest rates by 25 basis points in its July policy meeting. This measure comes in light of the annual consumer price inflation across the 19-member Euro area hitting a new record high of 8.1% in May. ECB also downgraded its growth forecasts and hinted at an additional rate hike later in September.
India, too, is seeing multiple rate hikes in the face of soaring inflation. The Reserve Bank of India (RBI) had slashed the repo rate in March 2020 to lower the impact of the pandemic and had left it unchanged for about two years. In May 2022, however, RBI increased the repo rate by 40 basis points and then again this week by 50 basis points.
US auto safety regulator, the National Highway Traffic Safety Administration (NHTSA), has escalated their investigation into Tesla’s Autopilot function this week. About 10 months ago, after identifying 11 cases where Tesla cars crashed into first-responder vehicles, NHSTA launched its investigation into 765,000 Tesla cars. Now, after identifying almost 200 new collision cases involving Tesla cars with the Autopilot function, the agency said it is upgrading its earlier investigation to an engineering analysis. This step is required before a possible recall of cars with the Autopilot system. After this announcement, Tesla’s stock closed about 0.9% lower on Thursday. The investigation will now review data from about 830,000 Tesla cars and NHTSA will be scrutinising advanced vehicle technologies with automated features more aggressively going forward.
The US is watching its inventories closely because rising inventories are one of the signs of recession. Major retailers, including Target, Walmart, Home Depot, and Best Buy have reported high levels of inventories as demand is beginning to slow. On Tuesday, Target’s stock closed down 2.31% after the company informed investors of a short-term hit to profits in the face of excess inventory and cancelled orders.
On Wednesday, members of the European Parliament voted to support a ban on the sale of new combustion engine cars by 2035. If the European Council approves this, it will be one of the most monumental laws to phase out petrol and diesel cars. This vote supports the EU’s plans to cut net carbon emissions by 55% compared to 1990 levels. To reach this target, a rapid reduction of emissions from industry, energy, and transport is required. If approved, the sale of hybrid cars will see a decline while the transition to fully electric vehicles will be expedited.
Goldman Sachs downgraded stocks of three tech giants to “sell” on Thursday. These include Netflix, eBay, and Roblox, a gaming and metaverse giant. These sell ratings are downgraded from “neutral” due to increased competition, lower revenue growth, and an overall weaker macro environment. Netflix’s stock tumbled around 5% in early trading Friday, and the other two tech stocks also declined.
With all the uncertainty in the global markets, you should consider investing in the stock market through Systematic Investment Plans (SIPs). SIP investing leverages the strategy of dollar-cost averaging to tide you through market volatility. With the Appreciate App, you can devise an SIP strategy depending on your goals – invest regularly in a range of high-performing US stocks and ETFs.
in the markets