Weekly Market Update

Author : Rachel Poole
Date : April 11, 2022

Global Market News

Global equities decline

Global equities declined on the week amid a sharp climb in US Treasury yields. The S&P 500 and Dow Jones closed the week down 1.26% and 0.27% respectively, while the Nasdaq fell 3.86%. The yield on the US 10-year Treasury note soared 32 basis points to 2.70%. On the other hand, the price of a barrel of West Texas Intermediate crude oil decreased to $97.99 on Friday afternoon. Volatility, as measured by the CBOE Volatility Index, ended the week at 21.

Fed signals rate hikes and balance sheet reduction

The release of the Federal Open Market Committee (FOMC) minutes this week signal that the Federal Reserve may hike interest rates in 50-basis-point increments over the next few months and may increase the pace of balance sheet reduction to “expeditiously” fight inflation. The FOMC’s discussion of the balance sheet suggests the reduction could begin as early as the May meeting and that the balance sheet could be reduced by more than $1 trillion over the next year. After the release of the minutes, which imply an upcoming decrease in market liquidity, the 2-year 10-year Treasury yield curve steepened.

Updated Market Figures

Coronavirus Updates

Covid-19 by the numbers

Global Confirmed Covid-19 cases: 497,900,000 Global Covid-19 deaths: 6,199,000
US Confirmed Covid-19 cases: 82,000,000 US Covid-19 deaths: 1,011,000
*As of Friday evening

China extends Shanghai lockdown, disrupting supply chains

China has extended what was supposed to be only a staggered, nine-day Covid-19 lockdown of Shanghai. With a record 20,000 daily new Covid-19 cases reported in the city on Thursday, restrictions have been tightened and extended to the entire city. The lockdown has quickly gotten out of hand, with reports of food and healthcare shortages emerging. The lockdown is causing major supply chain disruptions for the country as Shanghai is its largest city. There are fears that these mainland bottlenecks will result in major ocean shipping delays. While China has conducted other zero-Covid lockdowns in the last two years, the Shanghai lockdown is the largest in scale, impacting manufacturing, financial, and logistical hubs at the same time.

International Developments

Russia-Ukraine Updates: Russia suspended from Human Rights Council, West prepares new sanctions

The United Nations General Assembly voted to suspend Russia from the UN Human Rights Council on Thursday over reports of “gross and systematic violations and abuses of human rights” in Ukraine. Russia called the move illegitimate and subsequently announced it was quitting the body. Reports of atrocities committed by Russian forces in the Ukrainian city of Bucha and other towns surrounding Kyiv have prompted Western governments to prepare new sanctions against Russia. This week, Washington froze the US assets of two of Russia’s largest banks, imposed sanctions on the family members of Putin and Russian Foreign Minister Sergey Lavrov, and banned new American investment in the country. Yesterday, the EU banned Russian coal imports and prohibited Russian trucks and ships from entering the bloc, among other measures.

Yemen’s president steps down amid peace efforts

Yemen’s president has stepped down in an effort to push forward the peace efforts of Yemen’s civil war. The two sides of the conflict the Saudi-backed Yemeni government and Houthi rebels – began observing a two-month ceasefire on Saturday. The nationwide truce is the first coordinated effort between the warring parties since 2016, opening the door for a revival of peace talks. President Abd Rabbu Mansour Hadi’s departure could mend political divisions among the war’s anti-Houthi coalition. Saudi Arabi and the UAE have pledged $3 billion in aid to support the transition of power to a governing council.

US Social & Political Developments

Jackson confirmed as the Supreme Court’s first Black woman justice

In a 53-47 Senate vote, Ketanji Brown Jackson was confirmed to the Supreme Court on Thursday, with three Republicans joining their Democrat counterparts. Jackson is the first black woman to serve as a Supreme Court Justice and her addition means four women will be on the court for the first in history. Her confirmation marks a significant achievement for President Biden who had promised during his 2020 primary campaign that he would appoint a Black woman to the Supreme Court when given the opportunity. Jackson will be sworn in after Justice Stephen Breyer retires this summer.

Senate revives Lend-Lease program to support Ukraine

This week, the Senate unanimously approved the revival of the World War II-era Lend-Lease program. The legislation allows Washington to more efficiently send weapons and supplies to Ukraine. The program’s creation during World War II was groundbreaking, allowing the US to quickly resupply allies without having to go through time-consuming procedural hurdles. This step to pass the Ukraine Democracy Defense Lend-Lease Act of 2022, as it is named, was taken just days after news broke of Russian atrocities in Ukraine.

Corporate/Sector News

First commercial drones make deliveries in the US

Alphabet’s subsidiary, Wing, launched its drone-delivery service in the Dallas-Fort Worth area of Texas this week. Wing has partnered with Walgreens, Blue Bell Creameries, Easyvet, and Texas Health for its initial rollout, which means customers will be able to order pharmacy items, ice cream, and pet medications, among other things. Retail workers will load up the drones with small packages that weight 2.6 pounds or less. The drone will then climb to a height of 150 feet and travel to their delivery locations autonomously. Once at its destination, the drone will lower the package into the customer’s yard via a cable while staying roughly 23 feet in the air. Wing hopes to expand its drone delivery service to tens of thousands of homes in the area.

Mortgage rates rise

The average rate on a 30-year fixed mortgage in the US rose above 5% for the first time since 2011. Homebuyers are now facing a very expensive housing market with home prices up 20% in February from the year prior. Just a few months ago, homebuyers could find mortgage rates below 3% while supply was high. Now, low inventories and rising rates are pricing buyers out of the market.

Bid over Spirit Airlines heats up

The fight for Spirit Airlines is heating up. JetBlue has offered to purchase the budget carrier for $3.6 billion, which is about 40% more than Frontier Airlines bid in February. Both JetBlue and Frontier are looking to expand their national footprints to better compete against the big four airlines: United, Delta, American, and Southwest. However, a potential buyout by JetBlue has already raised antitrust concerns. Spirit’s board says it is reviewing the offer. Shares of Spirit rose 22% on Tuesday following the announcement.