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Inflation data caused market fall

9th April – 15th April 2022 | Another week in the markets

S&P 500 Nasdaq VIX DJIA Russell 1000 NYSE
4,392.59 13,351.08 22.70 34,451.23 2,004.98 16,511.51
-1.86% -2.56% 4.08% -0.24% 0.53% -0.72%
Nifty 50 Gold Silver Brent crude USD-INR EUR-INR
17,475.65 $1973.12 $25.66 $111.60 76.30 82.46
-1.29% 1.40% 3.68% 10.96% -0.51% 0.21%

Hello Saturday,

Markets ended the trading week on Thursday to observe Good Friday and indices fell as investors weighed bank earnings and inflation data.

  • US 10-year treasury yield rose to multi-year highs
  • Elon Musk launches a hostile takeover bid for Twitter
  • Four large US banks report double-digit declines in Q1
  • Chip shortage to continue in the long-term and impact several industries 
  • Packaged food companies face pressure from employees to cut all ties with Russia
  • Putin threatens to redirect energy supply to the East 

Taking stock | Flexing Muskle | Banks tank | Chips and dip | Soda sanctions | Eastward ho | Invest wisely

Taking stock 

The 10-year Treasury yield rose to multi-year highs pressuring growth stocks and dragging stock market indices into the negative territory. Nasdaq fell by 2.56%, S&P by 1.86%, and Dow by 0.26%. Out of all the major sectors, tech stocks fared the worst as investors are dropping growth stocks to move to more stable assets. Apple dropped 3.76%, Microsoft slipped 6.84%, and Google tumbled 6.53%. 

US 10-year Treasury yield:

A graph on US 10 year treasury yield

Source: CNBC

Flexing Muskle

Elon Musk believes that he is the right person to unlock the true potential of Twitter and has launched a hostile takeover bid. Musk has offered to buy the social media platform for $43 billion at $54.20 a share. This translates to a premium of about 18% to the closing price of Twitter’s stock this week. Twitter’s shares fluctuated throughout the trading session but closed down 1.7% on Thursday. 

This offer to buy the company comes just a week after Musk became its biggest shareholder with a stake of 9.2%. He said that he would have to reconsider his investment and sell his shares if this deal does not go through. This is why the takeover bid is considered to be a hostile move because it reads like a threat to give up the 9.2% stake if Musk does not get 100% ownership. Musk, in his filing with the Securities and Exchange Board (SEC), said that Twitter needs to be transformed into a private company to be the platform for free speech around the globe.

Banks tank

Major US banks reported double-digit declines in their Q1 profits this week. Goldman Sachs suffered a decline of 42%, while Citigroup of 46%. Morgan Stanley saw a decline of 11% and Wells Fargo 21%. While all four beat Wall Street estimates, the declines posted were steep and the stock market reaction on Thursday was mixed. Wells Fargo’s stock price dropped by 4.5%, while Citigroup’s stock saw a rise of 1.6%. Morgan Stanley was in the green too with a price rise of 0.8%, and Goldman Sach fell by 0.1%. The broader S&P 500 Finance Index fell by 1%. 

Next week the bank earnings will continue to roll in as banks such as Bank of America and Bank of New York Mellon will be reporting their Q1 results on Monday. Along with banks, several blue-chip companies are also going to report their earnings, including Netflix, Tesla, IBM, American Express, and Verizon. 

Chips and dip

Taiwan Semiconductor Manufacturing Co. (TSMC), which is a major supplier for Apple Inc. and other companies such as Qualcomm Inc., forecasted a jump of 37% in current quarter sales owing to the global chip shortage that has allowed chipmakers to charge premium prices. On Thursday, TMSC warned that the current chip shortage, which has forced electronics manufacturers and automakers to reduce production, would likely continue in the medium term. The CEO stated that this shortage is primarily due to the increased demand for AI and 5G, increased use of chips in gadgets, and supply chain issues with tool suppliers. 

Soda sanctions

Nestle, PepsiCo, and Mondelez, three of the world’s largest packaged food companies, face pressure from employees in Ukraine, Poland, and Eastern Europe to cut all commercial ties with Russia. While PepsiCo has suspended the sales of its sodas in Russia, it continues to sell snacks and dairy products by categorising them as daily essentials. Similar moves have been made by consumer goods companies such as Unilever and P&G, which continue to supply necessities such as milk and diapers. 

Eastward ho

On Thursday, Putin announced that Russia is going to start redirecting its gas eastwards in response to European countries phasing out Russian imports. He said that Europe has no rational replacement for gas as of now, which the countries themselves admit, and yet talk about cutting Russian energy supplies leading to price destabilisation. Russia has been forging closer ties with Asian countries such as China, which is the world’s largest energy consumer. As European countries try to phase Russian oil bans, Russia is working at diversifying away from its traditional supply markets, believing that it’s going to be Europe’s loss. 

Invest wisely

You shouldn’t let short-term fluctuations deter you from your investing strategy and long-term goals. The current global market volatility calls for investments in stocks with sound fundamentals with good long-term prospects and not a complete withdrawal from the equity market. You can access such stocks as well as diversify with the help of investment products like sectoral ETFs by downloading the Appreciate app.

Warm regards,

Another week
in the markets

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