Weekly Market Update

In the exceedingly unlikely event that you fell asleep last Friday and woke up a moment ago, it might appear as though it was a quiet week for stocks as the S&P 500 and Dow Jones Industrial Average were almost flat on the week, down 0.2% and up 0.06% respectively. However, that could not be farther from the truth as investors were whipsawed by huge daily market moves, particularly in the second half of the week. Wednesday’s much anticipated Federal Reserve announcements came in mostly as expected with the Fed hiking rates 50 basis points (0.5%) for the first time since 2000. However, bullish sentiment appeared to surge during Chairman Jerome Powell’s afternoon press conference when he stated that the Fed was “not actively considering a 75 basis point hike”. After those comments, the S&P 500 surged 3%, the best market session since April 2020, and stocks finished Wednesday up 4% on the week as investors breathed a sigh of relief.

However, in 2022 market bounces have been notoriously difficult to maintain and Thursday was a painful reminder of that as the S&P 500 gave back all of the prior day’s rally and then some, falling 3.6%, the second worst trading day since March 2020.  There were no specific factors for Thursday’s weakness either, but it coincided with the yield on the 10-year US Treasury forcefully breaking above 3% and the US dollar index hitting its highest levels since December 2002, both signs of significantly tighter financial conditions.  Friday’s jobs report probably created more questions than answers as well, as while it showed a robust 428K jobs were added in April and exceeded expectations, it also indicated that the pace of wage growth was slowing.  Next Wednesday features the April consumer price index (CPI) and we cannot overstate the importance of that report.  The market is expecting an 8.1% year-over-year headline inflation number, and 0.2% month-over-month print (per FactSet), but if we get any indications that inflation might finally be peaking, that could be the catalyst markets need to meaningfully rally.  In the interim, we realize that being an investor is a challenge right now.  Staying the course isn’t easy, but it remains the best strategy.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder