US Stocks recorded sharp losses for the week. Information technology and consumer staples shares held up best in the S&P 500 Index, while industrial and business services shares fared the worst. A decline in industrial giant Caterpillar weighed especially on the narrowly focused Dow Jones Industrial Average, while the smaller-cap benchmarks and the Nasdaq Composite Index fared best.
The week started out on a strong note, although on light trading volumes. Traders noted that there did not seem to a single catalyst behind the gains, but rather an overall sense that the factors that drove the market higher in recent months, including global economic strength, strong earnings growth, and enthusiasm over tax cuts, would help stocks recover from recent volatility.
HIGHER INTEREST RATES CONTINUE TO WORRY INVESTORS
The firm’s traders also observed that a spike in interest rates remained the biggest threat overhanging the market, however, and stocks headed sharply lower again on Tuesday as rate fears re-emerged. In testimony before the House Financial Services Committee, Federal Reserve Chair Jerome Powell said that he and fellow policymakers were “going to be taking the developments since the December meeting into account and writing down our new rate paths.” Some interpreted the remark to imply that recent strong economic and inflation data would prompt the Fed to raise rates four times in 2018, versus the three hikes previously expected
The S&P 500 and the DJIA respectively declined by 2.04% and 3.05% last week.
European stocks ended the week lower amid weak trading volumes, unpromising economic news, and fears about a brewing trade war following President Donald Trump’s announcement of tariffs on steel and aluminium. Both the pan-European STOXX 600 and the German DAX 30 fell just over 2%. The UK’s blue chip FTSE 100 fared slightly better but still posted a decline of just over 1%. FTSE 100 shares were weak following UK Prime Minister Theresa May’s rejection of the EU treaty draft on Brexit.