U.S. Equity Markets reversed afternoon losses to close higher, led by the 1.32% rally in the NASDAQ 100. U.S. stocks trended higher due to a decline in bond yields – as investors purchased shares of high-growth companies after recent declines. Because of this, some experts believe the Federal Reserve may not increase interest rates as aggressively as initially thought. Even so, concerns about global supply chains and the broader growth outlook remain. With China’s ongoing lockdowns and Russia’s invasion of Ukraine, many fear that growth could slow over the course of the year. Earnings season really ramps up this week. There are 175 S&P 500 Index members and 13 of the 30 Dow Jones Industrial Average companies releasing results. In a few days, we will know how much rising inflation has crushed corporate earnings. The technology sector will be the stand-out group. Last week, we heard from streaming-video giant Netflix (NFLX) and the numbers were not great. The company lost subscribers and guided for an even worse scenario in the second quarter. Management noted the tailwinds created by the coronavirus pandemic obscured reality. But the real tell about the market’s future will come when we see the numbers from these tech giants… Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (FB), and Microsoft (MSFT) all release results this week. Their stocks all soared as demand was pulled forward during the pandemic. Inflation and a return to normal might be a one-two punch to that demand. We’ll see. Currently, tech stocks make up 28% of the S&P 500 and 49% of the Nasdaq Composite Index. A rally in the big tech names will drive those Indexes higher while a selloff will fuel downside in the recent stock market rout. The earnings outcome for large-cap tech stock this week will determine the near-term direction for the S&P 500 and Nasdaq …Within the S&P 500, six of the 11 sectors finished higher. European Markets closed lower. Russian President Vladimir Putin is said to see no hope in a diplomatic resolution to the Ukraine conflict and is instead seeking to control as much territory as possible. European Central Bank President Christine Lagarde said raising interest rates will not help contain increasing energy costs, signalling it will lag the U.S. in tightening monetary policy. German Finance Minister Christian Lindner said the risk of stagflation is real as inflation is rising rapidly just as economic output is slowing. French President Emmanuel Macron looked set to win a second term as president, bringing a sense of political stability to Europe’s second-largest economy. In Asia, Bank of Japan Governor Kuroda Haruhiko said the central bank will stick with its current easy-money policies until it reaches its 2% inflation target. The steady rise in yields fuelled investors’ rotation out of riskier emerging market bonds into the relative safety of developed market sovereign bonds. The Chinese capital of Beijing imposed social-distancing restrictions in several districts and ordered mandatory COVID-19 testing after infections rose over the weekend. The Chinese city of Shanghai remained under strict lockdown orders after reporting more than 23,000 new COVID-19 infections. Elsewhere, Oil fell a further 3% after China expanded lockdowns, while Gold closed 1.76% lower on further Dollar strength.
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