THE WEEK ON WALL STREET
Stocks posted solid gains for the week, buoyed by the release of Fed meeting minutes and upbeat earnings from mid-size and discount retailers.
The Dow Jones Industrial Average jumped 6.24%, while the Standard & Poor’s 500 advanced 6.58%. The Nasdaq Composite index gained 6.84% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 2.09%.1,2,3
A GOOD WEEK
The stock market staged a broad rally last week, ignited by the release of minutes from the May’s Federal Open Market Committee (FOMC) meeting. The meeting notes eased concerns that the Fed might pursue a more aggressive monetary tightening stance than the Street had anticipated.
Investor sentiment rose owing to solid earnings and encouraging guidance from several mid-size and discount retailers, which eased concerns about the health of the American consumer. A smaller rise in the personal consumption expenditures price index, the Fed’s preferred measure of inflation, triggered a strong rally on Friday. The powerful move ended seven straight weeks of stock losses.4
FED MINUTES
The minutes from May’s FOMC meeting were released last week. They confirmed the likelihood of at least two successive 50 basis point interest rate hikes. The minutes also indicated they might need to raise rates to a level that acts to restrict economic growth, something that Fed Chair Jerome Powell acknowledged might be a painful process.5
Not all Fed members are fully committed to the more aggressive rate hikes. Last week, Atlanta Fed president Raphael Bostic wrote that a pause in rate increases in September might be appropriate. He joined other members in suggesting that economic conditions may warrant reconsideration of additional rate hikes beyond those already signaled by Powell.7
BY THE NUMBER$
STOCKS AND RATE HIKES - Between 6/30/2004 and 6/29/2006, the Fed raised interest rates 17 times. Each rate hike was 0.25 percentage points, a total increase of 4.25 percentage points. That took the Fed’s target short-term rate from 1.00% to 5.25%. From the close of trading on 6/30/2004 to the close of trading on 6/29/2006, the S&P 500 gained +15.7% (total return) over the 2-years, or +7.6% per year (source: BTN Research).
DIFFERENT PAYMENTS - For every $1,000 paid by Medicare for hospital inpatient and outpatient services, including costs incurred for medical facilities and services provided by healthcare professionals, an employer-sponsored health insurance plan would pay $2,240 (source: RAND Corporation). 6
THE WEEK AHEAD: KEY ECONOMIC DATA
Wednesday: Institute for Supply Management (ISM) Manufacturing Index. Jobs Openings and Labor Turnover Survey (JOLTS).
Thursday: Automated Data Processing (ADP) Employment Report. Jobless Claims. Factory Orders.
Friday: Employment Situation. Institute for Supply Management (ISM) Services Index.
Source: Econoday, May 27, 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: Salesforce, Inc. (CRM), HP, Inc. (HPQ).
Wednesday: MongoDB, Inc. (MDB).
Thursday: Broadcom, Inc. (AVGO), Hormel Foods Corporation (HRL), DocuSign (DOCU), CrowdStrike (CRWD).
Source: Zacks, May 27, 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
There are 2 nouns in the English language that become men’s names when you capitalize them – and when you capitalize them, you alter their pronunciation. Name either or both of these 2 nouns, both of which end in ‘b’.
LAST WEEK’S RIDDLE: Two trains are crossing America from coast to coast, traveling over 3,000 miles of track. The Gentle Zephyr is going west at 70mph; the Western Wind is headed east at 80mph. So which train will be closer to the east coast when they roll by each other in Kansas?
ANSWER: Neither. When the trains meet, they will be at the same point - therefore the same distance from the east coast.