Weekly Recap: Stocks Higher in Short Week of Trading
Stocks Trade Higher After Fed's Decision to Hike Rates 75 Basis Points
Monday, June 20th
Market was closed in observance of Juneteenth
Tuesday, June 21st
S&P 500: +2.52%.
Stocks rebounded on Tuesday after a rough week before where we saw the Federal Reserve raise interest rates by 75 basis points. Stocks initially jumped on the news, but when the markets opened Thursday after the FOMC meeting, the only way was down. Many attributed this green day to a “bear market rally”, or a “dead cat bounce”, which is when traders buy simply because they are out of reasons to sell.
Wednesday, June 22nd
S&P 500: -0.18%.
Federal Reserve Chair Jerome Powell testified on monetary policy at the Senate Banking Committee. When Jerome Powell was asked if the Federal Reserve’s rate increases could cause a recession, he replied: “It’s not our intended outcome at all, but it’s certainly a possibility”. Lawmakers pushed him on high gas prices and supply issues, of which he has no control over and refused comment. Jerome Powell admits that macroeconomic events, such as the war in Ukraine, has made their job at the Federal Reserve much more difficult, but that we have a strong economy and tight labor market in the United States.
Thursday, June 23rd
S&P 500: +0.98%.
Jerome Powell testified at the House Financial Services Committee, and was pressed on “corporate greed” and inflation, along with the Fed’s monetary policy objectives. Jerome Powell said that he believes profit margins in the S&P 500, which hit record highs in 2021, will return to normal as supply chain issues ease and inflation comes down. Jerome Powell also admits the Federal Reserve underestimated inflation, and hindsight tells them they should have taken action sooner.
Darden Restaurants, $DRI, owner of Olive Garden, Longhorn, and other restaurants, reported earnings Thursday morning, beating expectations and raising guidance for the rest of 2022. This is a good sign for the consumer, showing Darden believes they will not see a significant slowdown in traffic this year.
Friday, June 24th
S&P 500: 2.62% as of 3:30 pm EST.
Stocks start the day green and end the day green to finish this week’s rally. At 10 am we got positive economic data, New Home Sales came in at +10.7%, with only less than +2% expected, and 5-year inflation expectations came in at 3.1%, with 3.3% expected. On the downside, consumer sentiment came in at 50.0, which is a record low. The overall markets seemed unphased by this reading, but we did see 10-year treasury notes fall to 3.072% after these readings.
The rally we saw into the end of the week seems related to the fact that prices of many different commodities came down this week, such as Oil, Corn, Wheat, and Soybeans.
What to Look For Next Week
In economic news, next Thursday, June 30, we get PCE, Personal Consumption Expenditures, inflation numbers, which is the Federal Reserve’s preferred inflation metric. PCE inflation, which excludes food and energy costs as they are highly volatile, rose 4.9% in April, and should be expected to be to be higher for the month of May as it generally follows CPI inflation.
In company earnings news, Nike reports earnings on Monday, General Mills reports on Wednesday, and Micron and Walgreens Boots Alliance report on Thursday.