August 16, 2022

Stocks Record Sharp Gains for Day and Week, Copper Falls

On Friday, stocks across multiple global markets rallied to record strong weekly gains, while worries of rate hikes and inflation were eased significantly due to a fall in commodity prices.

Worries ease

There was a 3.1% gain seen in the S&P 500 index that marked the biggest percentage gain seen in a day after May 2020. Likewise, there was a 4.8% rise in the MSCI global shares index, putting an end to declines for three consecutive weeks. There was also a rise in US Treasury yields from lows of two weeks.

Investors had been concerned that a sharp hike in interest rates by the US Federal Reserve and other global central banks for taming inflation would result in a recession. This would obviously lead to a fall in demand for commodities and other products.

Market analysts said that the stock market had been oversold at the start of the week, which meant that a bounce had to happen. Commodity prices came down, as did oil prices, which shows that there has already been a marked slowdown in the economy, if not a complete recession. In addition, the reading of a consumer sentiment survey by the University of Michigan for five-year inflation expectations had a positive impact on stocks.

Estimates in mid-June had put it around 3.3%, but it had come down to 3.1%.

Good index performance

Last week, the benchmark S&P 500 index had entered a bear market, as it declined by more than 20% from its high in January. It turned around this week, as there was a 3.06% gain for the day or that of 116.01 points, which took it to 3,911.74. As for weekly gain, it stood at 6.4%.

The Dow Jones Industrial Average also recorded a 2.68% gain, which was about 832.32 points and helped it reach 31,500.68. Meanwhile, there was a 3.34% gain in the Nasdaq Composite, which was around 375.43 points and it closed at 11,607.02. The two indexes also gained for the week by 5.4% and 7.5%, respectively.

There was a 2.62% gain in the STOXX 600 index and a 2.63% gain in the MSCI world stocks index.

Commodity prices fall

The benchmark copper recorded a 0.5% decline on the London Metal Exchange, which brought it to $8,367 per tonne after it had reached $8,122.50. This was a 25% decline from its peak in March and the lowest it has been since last year in February. There was also a fall in other industrial metals.

While oil prices did climb a bit on Friday, it was still their second straight week of decline. There was a 2.8% gain in Brent crude, as it increased by $3.07 to reach $113.2 per barrel. Meanwhile, a 3.2% gain or that of $3.35 was recorded in the West Texas Intermediate crude, taking it to $107.62 per barrel.

Yields in the Treasury market have declined from their decade highs that they had hit last week before the meeting of the US Federal Reserve. The meeting had seen the central bank hike interest rates by 75 basis points.

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