The great, silly market rebound from the COVID-19 lows of late March was rudely interrupted last week by a dose of reality from the US Federal Reserve. So will the pause continue or will investors take it higher this week?
Friday saw a cautious and shaky bounce on Wall Street and futures trading had other markets poised for a hesitant start to the week today.
Most major share markets fell sharply over last week on concerns about a second wave of coronavirus cases in more and more US states and the pace of economic recovery after those cautious Fed comments.
This came after a huge rally since the March lows – with US shares rising 44% and Australian shares rising 35% – left the market overbought and due for a pause or pullback, according to the AMP’s chief economist, Dr. Shane Oliver.
For the week US shares fell 4.8%, Eurozone shares lost 6.4% and Japanese shares lost 2.4% but Chinese shares edged up just 0.1%.
Reflecting the weak global lead Australian shares fell sharply on Thursday and Friday resulting in a loss of 2.5% for the week with falls in energy, property, and financial shares leading the way down.
The return to “risk-off” also saw bond yields fall back sharply over the week and the US dollar higher – up 0.7% on Friday alone.
The Australian dollar fell to 68.66 US cents – last Monday it was around 70.20 US cents. The yield on US 10 year bonds added nearly 4 basis points to 0.69% but it was around 0.90% the preceding Friday.
US stocks rose on Friday thanks to bargain hunters stepped back into the market following sharp losses a day earlier, but all three major indexes suffered their biggest weekly percentage declines since March.
The session’s trading was marked by wild swings, with the S&P 500 up about 3% at its high of the session and down about 0.6% at the low.
The Dow rose 477.37 points, or 1.9%, to 25,605.54, the S&P 500 was up 39.21 points, or 1.31%, to 3,041.31 and the Nasdaq added 96.08 points, or 1.01%, to 9,588.81.
For the week, the Dow ended down 5.6%, the S&P 500 fell 4.8% and the Nasdaq shed 2.3%, the biggest weekly percentage declines for the indexes since the week ended March 20.
Meanwhile, oil prices fell for the first time in seven weeks while Comex gold futures settled down 0.1% at $1,737.30.
US Treasury yields rose as stocks clawed back some ground. The 10-year US Treasury yield rose to 0.7067% – a week earlier it had touched 0.90% and on Thursday fell as low as 0.67%.
