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May 20, 2022

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Dow suffers longest losing streak since 2001 as stocks benchmarks extend weekly losses despite closing sharply higher Friday

U.S. stocks ended sharply higher Friday, but all three major benchmark still booked another week of losses, as investors assessed the scope for further downside and the Federal Reserve’s ability to get inflation under control without sending the economy into a tailspin.

The Dow Jones Industrial Average fell for a seventh straight week, its longest losing streak since July 2001, according to Dow Jones Market Data.

How did stock benchmarks perform?
  • The Dow Jones Industrial Average
    DJIA,
    +1.47%
    rose 466.36 points, or 1.5%, to close at 32,196.66.

  • The S&P 500
    SPX,
    +2.39%
    climbed 93.81 points, or 2.4%, to finish at 4,023.89.

  • The Nasdaq Composite
    COMP,
    +3.82%
    jumped 434.04 points, or 3.8%, to end at 11,805, booking its biggest daily percentage gain since Nov. 4, 2020, according to Dow Jones Market Data.

For the week, the Dow fell 2.1%, the S&P 500 slid 2.4% and the Nasdaq dropped 2.8%. The S&P 500 dropped for a sixth straight week, its worst losing streak since June 2011, according to Dow Jones Market Data. The Nasdaq Composite also declined for a sixth consecutive week, booking its longest losing streak since November 2012.

What drove the markets?

The stock market’s bounce Friday reflects the type of “sawtooth moves” seen when markets are looking for a bottom, according to Brendan Connaughton, founder and managing partner at Catalyst Private Wealth. 

“The market has been beaten up,” Connaughton said by phone Friday. “This is the beginning of a bottoming process.”

Some analysts see stocks as due for at least a short-term bounce after recent losses, arguing that selling this week may have reached levels that signaled near-term capitulation. They cautioned, however, that a downtrend may still be firmly in place.

Mark Hulbert: The beginning of the end of the stock market’s correction could be near

“As we have seen time and time again, stocks have struggled to sustain any recovery attempts as traders have been quick to take profit on rebounds amid a bearish macro back drop — rising interest rates, low growth and high inflation,” said Fawad Razaqzada, market analyst at City Index and Forex.com, in a note.

In an interview aired late Thursday on National Public Radio’s Marketplace program, Federal Reserve Chairman Jerome Powell warned that the central bank’s ability to tighten policy without sending the economy into a steep downturn wasn’t solely up to policy makers.

“So the question whether we can execute a soft landing or not, it may actually depend on factors that we don’t control,” Powell said.

Powell quibbled with the suggestion that last week he had taken the prospect of a 75 basis point rate rise off the table, emphasizing that he had said, “We weren’t actively considering that.”

Meanwhile, the S&P 500 has skirted bear market territory, defined as a drop of 20% from a recent peak, closing Friday 16.1 % off its record high on Jan. 3, according to Dow Jones Market Data.

Read: The S&P 500 is on the brink of a bear market. Here’s the threshold.

But the weekly loss for the S&P 500 is the first time in over a decade that the index has seen six straight weeks of declines, according to a team of Deutsche Bank strategists led by Henry Hill.

“Unlike in April, when the equity declines were triggered by the prospect of a more aggressive Fed tightening cycle and went hand-in-hand with sovereign bond losses, this week’s declines have much more obviously surrounded global growth risks, which you can see in the way that Fed Funds futures are now beginning to take out some of the tightening they’d been pricing in over the year ahead,” said Hill.

The market has endured higher-than-forecast consumer prices this week, as well as continued high producer prices.

Read: Fed tightening comes ‘fraught with volatility’ in the stock market, but this JPMorgan portfolio manager says he isn’t betting on a U.S. recession

Meanwhile, U.S. import prices cooled in April after a sharp gain over the previous three months, the Labor Department said Friday. Prices for overseas goods were unchanged after increasing 2.9% in March. Economists polled by The Wall Street Journal had expected a 0.6% gain in import prices in April.

In other economic data released Friday, the University of Michigan’s gauge of consumer sentiment fell to 59.1 in May from a final April reading of 65.2, its lowest level in more than 10 years. Economists were expecting a print of 64.1.

The drop takes the confidence gauge “deeper into recessionary territory. But confidence has been a poor guide to consumption growth in recent years, so we would not read too much into that signal,” said Michael Pearce, senior U.S. economist at Capital Economics, in a note.

Some recovery in battered cryptocurrency markets on Friday may have helped sentiment overall, said analysts.

Bitcoin
BTCUSD,
-2.55%
was up 4.8% at $29,942, staging a slight recovery after falling Thursday to around $25,400, the lowest level since December 2020, according to CoinDesk data. The cryptocurrency had dropped amid a collapse of some stablecoins, which are supposed to be pegged to the dollar.

Read: Why is UST, LUNA crashing? Collapse of a once $40 billion cryptocurrency, explained

Which companies were in focus?
  • Twitter Inc. TWTR shares dropped 9.7% after Elon Musk tweeted that the deal to buy the social-media company was “temporarily on hold.” Musk, the chief executive of electric vehicle maker Tesla Inc. TSLA said the hold on the deal is “pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” In a subsequent tweet, Musk said he was “Still committed to the acquisition.” Tesla shares climbed 5.7%.

  • Shares of Robinhood Markets Inc. HOOD jumped 24.9% after a filing late Thursday revealed that Sam Bankman-Fried, the chief executive of cryptocurrency exchange FTX Trading, had taken a 7.6% stake in the popular trading platform.

See: Musk’s ‘bizarre tweet’ is the latest reminder that retailer investors eyeing Twitter should proceed with caution

How did other assets fare?
  • The yield on the 10-year note
    TMUBMUSD10Y,
    2.932%
    rose 11.7 basis points Friday to 2.932%. Yields and debt prices move in opposite directions.

  • In oil futures
    CL.1,
    +3.82%,
    West Texas Intermediate crude for June delivery
    CLM22,
    +3.82%
    rose 4.1% to finish at $110.49 a barrel for a weekly gain of 0.7%.

  • Gold futures 
    GC00,
    -0.78%
    fell, with gold for June delivery settling 0.9% lower at $1,808.20 an ounce. That’s the lowest close for the most-active contract since Feb. 4, 2022, according to Dow Jones Market Data.

  • In European equities, the Stoxx Europe 600 
    SXXP,
    +2.14%
    closed 2.1% higher Friday for a weekly gain of 0.8%. London’s FTSE 100 UK:UKX gained 2.6% Friday, advancing 0.4% for the week.

  • In Asia, the Shanghai Composite CN:SHCOMP ended 1% higher, bringing its weekly gain to 2.8%. The Hang Seng Index HK:HSI jumped 2.7% Friday and slid 0.5% for the week. Japan’s Nikkei 225 JP:NIK rose 2.6% Friday but still booked a weekly loss of 2.1%.

–Barbara Kollmeyer contributed to this report.