Inflation Fears Hit Stocks While Bond Yields Stabilize

Ed Mertiri |

TV Interviews with Erin Gibbs

Stock dispersion reaches financial crisis highs



The S&P 500 index had another week of pain, posting a seventh consecutive weekly loss, the longest negative streak since March 2001. Consumer stocks, both staples and discretionary were the hardest hit, dropping 9% and 7%, respectively. The slide in consumer stocks was exacerbated by disappointing earnings reports in major names like Walmart combined with negative news around Tesla. Inflation and supply chain issues are once again at the forefront of investors worries.

Valuation is becoming key metric investors follow as rising interest rates put pressures on historically high valuation for future growth. The S&P 500 Growth index just only reached it’s 10 years average valuation, coming down from peak highs in 2020 and 2021. This implies there could still be more compression to come as stocks are only reaching “normalized” levels, not cheap. Last week large technology stocks pulled down the benchmark with Growth declining 4%. Not all stocks declined last week. Energy stocks rose in line with oil, up 1.4% last week; Utilities and Health Care also saw buying, rising 0.4% and 0.9% in turn.

Bond prices rose, pushing yields down, over the last two weeks as investors flock to safety. Moving towards a more traditional risk-off trading pattern. Bond yields have been stabilizing with the 10-year closing at 2.85%, a significant drop from its peak of 3.15% just two weeks ago.

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