Invest: Stock market after 7-week losing streak

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This week was a good week.

Returns of this week.

US stocks snapped a 7-week losing streak on Friday, as investors bet that softening economic data would be enough to slow the Federal Reserve’s tightening of monetary policy.

The blue-chip US equities index, the S&P 500, finished the week 6.6 per cent higher, its best showing since November 2020, ending the longest run of weekly losses since 2001. The technology-heavy Nasdaq Composite also rallied, up 6.8 per cent for the week.

Weaker economic data, coupled with early signs that inflation may have peaked, gave investors enough reason to dial back their expectations for how aggressively the US central bank will raise interest rates. Higher rates raise borrowing costs for companies and can curtail future earnings. Despite the bounce in stock prices, some investors remain wary. The positive narrative only holds if softening data does not foretell a recession, and if the Fed’s campaign to curb inflation is successful before it cuts too far into growth.

“We still think this is not the end of the downdraft, but more a bear market bounce,” said Alex Veroude, chief investment officer at Insight Investment. Tuesday was the only day stocks recorded a loss, following weak manufacturing data and a report of lower-than-expected new home sales. That data added to nervousness following a number of weak first-quarter earnings reports from marquee retailers such as Target and Walmart last week.