THE WEEK ON WALL STREET
Stocks moved lower last week as recession fears deepened following a Fed hike in interest rates and weak economic data.
The Dow Jones Industrial Average fell 4.79%, while the Standard & Poor’s 500 dropped 5.79%. The Nasdaq Composite index slid 4.78% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slumped 4.51%.1,2,3
STOCKS TUMBLE
Stocks were under pressure all week due to inflation worries, higher yields, and rising recession concerns. In advance of the much-awaited mid-week meeting of the Federal Open Market Committee (FOMC), bond yields jumped, and stocks retreated on speculation that the Fed might raise rates by 75 basis points. When the Fed announced a 75 basis point hike on Wednesday, stocks rebounded strongly.
The enthusiasm was short-lived. Stocks resumed their slide on Thursday as global central banks followed with their own rate hikes. Recession fears grew based on a weak housing starts report and a contraction in the Philadelphia Fed Business Index–the first contraction since May 2020.4
FED RATE HIKE
The Federal Reserve announced a 0.75% hike in the federal funds rate, making it the biggest rate increase since 1994 and signaling its commitment to address inflation. The report from last week’s FOMC meeting also indicated new rate projections, showing that all members expect rates to rise to at least 3.0% by year-end, with half the members expecting rates to rise to 3.375%.5
The 75 basis point rate increase was a late-developing change from earlier Fed guidance of a 50 basis point increase. The change of heart was in response to recent inflation data and rising inflationary expectations.6
BY THE NUMBER$
HOW LONG WILL THE BEAR GROWL? - After suffering 10 separate 'bear' markets between 1950 and 2021, the S&P recovered and eventually achieved a new all-time high each time. The average length of time it took to retrace it's steps from a 'bear' market low to a new closing high was 25.5 months. The quickest recovery for stocks took place over 3 months in 1982, while the longest recovery took 70 months between 1974-1980. (source: BTN Research).
WOW! - The yield on the 10-year Treasury note has more than doubled YTD, rising from 1.5% as of the close of trading on 12/31/2021 to 3.2% as of the close of trading on 6/17/2022. Over the last 60 years (1962-2021), the yield on the 10-year note has never doubled over the course of a calendar year (source:Treasury Department).
THE WEEK AHEAD: KEY ECONOMIC DATA
Thursday : Jobless Claims. Purchasing Managers’ Index (PMI).
Friday : New Home Sales. Consumer Sentiment.
Source: Econoday, June 17, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Tuesday : Lennar Corporation (LEN).
Wednesday : KB Home (KBH).
Thursday : FedEx Corporation (FDX), Darden Restaurants, Inc. (DRI).
Source: Zacks, June 17, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
THE WEEKLY RIDDLE
It has 18 legs, is uniformed, walks and runs on grass and artificial turf, and catches flies. What is it?
Last Week's Riddle: What surrounds everyone and is the end of time and space? ANSWER: The letter "e."
