It was a tough week for the markets as investors decided to take risk off the table. For four consecutive days, the market was in the downtrend and only on Friday “bulls” were able to break this negative tendency. S&P 500 finished the week down 2.2% while Nasdaq and Russell 2000 lost 2.7% and 2%, respectively. There were a few reasons for the seller’s dominance. First, macro data. Existing home sales grew less than analyst’s expectations, 4.88mln. units vs. 4.9mln. Durable goods fell 1.4% in February, probably due to the bad winter weather and conflict in West coast shipping ports, as the Commerce Department reports. Secondly, investors did not like two Fed Reserve Presidents comments. Specifically, John Williams, head of San Francisco branch expressed his support for the rate hike later this year, while Saint Louis James Bullard advised the market to prepare for the rate hike “sometime in the summer.” Thirdly, military operation in Yemen, led by Saudi Arabia and its allies weighted negatively on the markets on Thursday.
Considering the dominance of negative news during the week, no wonder the “Fear Index” grew almost 16% for the week and closed atop of its 200 moving average.
Now, on to the charts and numbers.
On the corporate front, there were both good and bad news. On Tuesday, Germanwings, a wholly owned by Lufthansa, reported an air crash in French Alps, that cost 150 lives. Most all US airlines were under pressure for the most of week, with the American Airlines and Delta being the biggest losers, -5.6% and -5.4%, respectively. The “good” news is the potential merger of H.J. Heinz and Kraft. Both companies entered into a merger agreement to create the third largest food and beverage company in America. The projected value of the new company is about $36.6 billion and was reflected by 44% increase in Kraft price.
Excluding Friday, it was a good week for commodities. Lower dollar supported oil and gold earlier in the week while bombing of Yemen facilitated the surge in oil prices on Thursday by almost 5%. However, on Friday oil traders decided to take some profit off, causing -5.8% drop in WTI. Despite, the sell-off on Friday, oil and gold managed to close the week on a positive territory, gaining 4.3% and 1.3% each.