Week in Review: April 18, 2022

Markets ended the holiday-shortened week lower as investors continued to fret about surging interest rates and inflation, and how the Fed intends to tackle the latter. In addition, 1Q22 earnings season officially began, giving investors an early read on how companies are coping with recent price surges and additional supply chain disruptions stemming from fighting in Ukraine.

According to Freddie Mac, the average 30-year mortgage rate exceeded 5% for the first time since 2010. A year ago, 30-year mortgage rates stood at 3.0% and were still just 3.1% at the end of 2021. On a $1M home, assuming 20% down and a 30-year fixed mortgage, an increase in rates from 3% to 5% increases the monthly principal and interest payment by $922.

Somewhat lost among the headlines was China’s ongoing efforts to stop the rapid spread of new coronavirus cases that are challenging the country’s zero-Covid policy. In Shanghai, the country’s financial hub, all 25M residents remained isolated in their homes following a lockdown that began on March 28.  Other areas, including large industrial centers, are also currently on lockdown, impacting both the country’s economic growth as well as global supply chains.

First quarter earnings season officially started, led by reports from a number of large banks. Through Friday, just 7% of S&P 500 companies had reported, with 77% beating their consensus earnings estimate, and 80% beating their revenue estimate. According to industry group Factset, aggregate S&P 500 earnings for 1Q22 are expected to increase 5.1% from 1Q21.