With the Market Pullback, Powell Speaks; FDA for Johnson & Johnson
Last week, the stock market performed poorly, as the Dow Jones, S&P 500, NASDAQ, and the Russell 2000 all produced negative returns for the week. In particular, many tech stocks were hit hard by the selloffs. While some see this as a healthy correction, others may be more concerned with the state of the market.
One of the reasons the market was in “the red” this week was due to investor concerns over future interest rates. A rise in interest rates would likely affect tech stocks the most negatively, explaining the poor performance of these stocks this past week. Value stocks that already have a large amount of cash tend to handle rising interest rates better.
Federal Reserve Chairman Jerome Powell stated that the U.S. economy still has a lot more recovering to do and that they do not plan on hiking interest rates until inflation reaches the 2% mark. Despite this, investors are worried that high stimulus spending will result in interest rates having to be raised to slow inflation.
What has performed well in the last week is the 10-year treasury yield, reaching a 1 year high. This also has to do with the concerns about inflation. Many investors are working to minimize risk by moving towards bonds, which in turn has really hurt riskier markets.
Asian stocks initially were hit extremely hard by the selloffs. Though, as the Fed continues to reassure investors that rates will remain low, Asian stocks have started to rebound.
In other news, Johnson & Johnson received positive news regarding their Covid-19 vaccine. The FDA stated that this vaccine is safe and effective. The vaccine was approved Saturday, adding to the American vaccine arsenal. This of course should help the markets by working with other vaccines to bring the pandemic to a halt.
Finally, one of the most popular stocks at the moment, GameStop, had another 100+% spike in share price this past week. Neil Campling, the head of technology research at Mirabaud Securities says that the three R’s (Robinhood, Retail, Reddit) are having a strong impact once again.
While some analysts are not happy with the insane spikes in “meme stocks”, many retail investors are enjoying the ride. These stocks are about as volatile as it gets at this point, so invest at your own risk.
Overall, the market had a tough week. Much of this stemmed from investors worrying about a potential increase in interest rates. However, the Fed continues to make it clear that they are not planning on hiking up rates anytime soon.