After surging for several weeks on hopes of a fast rebound in the economy, US stocks struggled to carry the momentum forward last week. The major US indices recorded sharp losses for the week, despite the Nasdaq breaching the 10,000 mark for the first time in its history, during the week.
Gloom gripped the market on Wednesday, even though the Federal Reserve announced its policy decision to keep interest rates unchanged at record low levels of near zero. However, the central bank’s comments of the road to recovery being long disappointed markets. The Fed said it plans to hold interest rates through 2022, while extending its support to the markets by continuing to buy bonds. What really hurt investor sentiment was the central bank’s projection of the US economy contracting by 6.5% this year, although expectations are for it to grow by 5% in 2021.
Despite a decline in the number of initial jobless claims in the latest week, the Fed’s dismal outlook resulted in the markets tumbling. Concerns over a second wave of covid-19 infections in some of the US states also hurt the markets last week.
Performance of US Indices
US stocks closed Friday on a strong note; but were down sharply for the week. In fact, on Thursday, the stock market recorded its sharpest decline since the coronavirus slump in March due to the Fed’s outlook.
The Dow Jones Industrial Average added 477 points on Friday to settle at 25,605.54, but was down 5.55% last week. The sluggish performance followed strong gains by the Dow over the past four weeks. The S&P 500 index rose 39.21 points on Friday, but closed the week lower by 4.8%. The Nasdaq Composite Index, which rose past the 10,000 milestone during the week, posted a weekly loss of 2.33%.
Top US Stocks of the Week
Shares of Thor Industries, Inc. (NYSE: THO) climbed more than 11% on Monday after the Elkhart, Indiana-based company reported upbeat results for its third quarter. Thor’s stock gained about 7% last week.
On Wednesday, shares of Verint Systems Inc. (NASDAQ: VRNT) nosedived 12% after the release of disappointing quarterly results. Verint’s shares were down around 8% for the week.
Shares of Guess?, Inc. (NYSE: GES) tumbled 20% on Wednesday as the Los Angeles, California-based company reported downbeat first-quarter results. The company’s stock ended the week with a massive loss of 24%.
Five Below, Inc’s (NASDAQ: FIVE) shares gained 10% despite the company posting disappointing results for its first quarter.
Shares of Adobe Inc. (NASDAQ: ADBE) climbed around 5% on Friday after the San Jose, California-based company reported upbeat earnings for its fiscal second quarter. Adobe’s stock gained 3.5% last week.
Performance of European Indices
European stocks delivered their worst weekly downturn since the March sell-off on fears of a second wave of coronavirus infections, the US Fed’s dismal economic outlook and IMF’s chief economist Gita Gopinath warning that the outlook for the global economy seemed to be worsening. Saying that the coronavirus outbreak had left a “significant scarring” on the global economy, Gopinath added that the IMF’s outlook, scheduled to be announced later this month, could be “very likely worse” than the earlier projection of a 3.0% contraction in the global economy.
The Stoxx Europe 600 Index rose 0.3% on Friday, after shedding 4% on Thursday. The index closed the week lower by 5.7%, marking its worst week since March 13. Germany’s DAX 30 and French CAC 40 declined by 7% and 6.9%, respectively.
The FTSE 100 gained 0.5% on Friday as the data disclosed the country’s GDP contracted by 20.4% in April. London’s index posted losses of 5.8% for the week.
Top European Stocks of the Week
British American Tobacco’s (LON: BATS) shares declined more than 3% on Tuesday after the cigarette manufacturer reduced its outlook for the year.
On Tuesday, Aveva’s (LON: AVV) shares rose 4% after the UK group announced a surge in its adjusted operating earnings and held its dividend payments.
Shares of Just Eat Takeaway’s (OTC: TKAY) plunged 13% on Wednesday after the food delivery company said it was in merger talks with US-based Grubhub. Grubhub announced the next day that it had agreed to be acquired by Just Eat Takeaway.
The Forex Market
The British pound slipped versus the US dollar last week after making strong gains for ten straight sessions. The sterling recovered slightly against the greenback on Friday, but still closed the week lower by around 1%. The British economy shrank 10.4% in the three months to April, higher than estimates of a 10% decline.
The US dollar slid around 2% versus the yen last week as traders preferred the Japanese currency as a safe-haven option amid global recession fears. Industrial production in Japan dipped the most since 2011, falling 9.8% in April.
The Crypto Market
Bitcoin fell last week tracking the stock market slump. Despite the downturn, bitcoin remains strong this year, up around 30% till date.
There are speculations of the digital currency plummeting to $9,000 in the near term. Bitcoin traded down by 0.2% to $9,384 over the weekend.