Economic Update
Quarterly Market Review: April – June 2022
The Markets (second quarter through June 30, 2022)
For the first time since 2015, each of the benchmark indexes lost value for two consecutive quarters. They also posted losses for June, marking three consecutive down months for the tech-heavy Nasdaq, its longest losing streak since 2015. Investors watched for signs of an economic deceleration in the U.S., with inflation continuing to run at multi-decade highs, and monetary policymakers maintaining a firm stance that their priority remains bringing down prices even if it means slowing economic growth. Nevertheless, Wall Street has suffered one of its worst six-month stretches in decades. The S&P 500 is poised for its worst first half since 1962. Ten-year Treasury yields climbed from 2.37% at the beginning of the quarter to over 3.00%. The dollar is on pace for its best quarter since 2016. Consumer spending slowed for the first time this year, possibly indicating that the economy is indeed weakening. Consumer sentiment fell to its lowest level since 2021. Crude oil prices rose marginally in the quarter, spiking at $123.18 per barrel in early June, ultimately settling at around $105.00 by the end of the quarter. Gold prices declined each month of the quarter as investors weighed rising interest rates against fears of a recession. According to AAA, as of June 30, the average price for regular gasoline was $4.857 per gallon, $0.90 less than the previous week but $1.80 per gallon more than than a year ago. As prices for crude oil and gasoline increased, demand waned, helping to pull prices lower. In addition, OPEC+ agreed to increase output in July and August to compensate for the drop in production due to the sanctions placed on Russia.
Market Week: June 27, 2022
The Markets (as of market close June 24, 2022)
The stock and bond markets were closed last Monday to observe the Juneteenth federal holiday. Then, after three weeks of bruising losses, stocks rebounded over the next four days to deliver solid gains. Investors hung on every word during Fed Chair Jerome Powell’s two days of testimony before Congress, but ironically it was signs of economic weakness that seemed to lift their spirits. The tech-heavy Nasdaq surged 7.5% and the S&P 500, which increased 6.5%, had its second-best showing of the year. The Russell 2000 rose 6.0%, followed by the Dow (5.4%) and the Global Dow (2.5%). Crude oil prices dropped (5.4%) for the second week in a row.
Market Week: June 21, 2022
The Markets (as of market close June 17, 2022)
Last week was marked by volatility. Stocks experienced brief rallies throughout the week, but not enough to overcome corresponding troughs that ultimately dragged the major benchmark indexes lower. The Federal Reserve’s intent to bring inflation down to 2.0% through tighter monetary policy has investors concerned about the impact on the economy in general and corporate valuations in particular. That is partially reflected in the stock market, as the S&P 500 is firmly in bear territory, down more than 20.0% from its all-time high. Despite a late Friday rally, stocks ended last week down. The Russell 2000 dropped nearly 7.5% for the week and is down 25.81% for the year. The Nasdaq gave back 5.80%, followed by the Global Dow, the Dow, and the S&P 500. Crude oil prices fell over $10.00 to end the week at roughly $109.95 per barrel. The dollar inched higher, while gold prices slid.
Market Week: June 13, 2022
The Markets (as of market close June 10, 2022)
U.S. stocks tumbled with their biggest losses in three weeks, and Treasury yields rose by 20 basis points as inflation continued to push higher. Each of the benchmark indexes listed here declined, led by the Nasdaq and the S&P 500, which dropped by more than 5.0%. Crude oil prices rose marginally, the dollar inched higher, while gold prices rose by more than $22.00 per ounce. Last Friday, the latest data showed that the Consumer Price Index rose 8.6% in May from one year earlier, the fastest pace since 1981. Several factors are driving price pressures including the Russia/Ukraine war, which has impacted energy and crude oil prices; supply-chain disruptions; China’s economic lockdown in response to rising COVID cases; and a tight labor market, with demand for workers far outpacing supply, driving wages higher. Demand for travel and other services has surged with the onset of summer and the receding impact of COVID-19, pushing up prices for airline fares, hotels, and dining. Unfortunately, higher prices are cutting into profits for many businesses. Also, in its attempt to temper inflationary pressures, the Federal Reserve is likely to step up measures to tighten spending by raising interest rates further increasing the cost of borrowing and doing business. For consumers in general and investors in particular, higher prices are likely to impact consumer spending and slow economic activity.
Market Week: June 6, 2022
The Markets (as of market close June 3, 2022)
Investors swallowed modest losses last week as the stock market served up another disappointing performance. Each of the benchmark indexes listed here lost value, with the S&P 500 declining 1.2%, the Nasdaq pulling back 1.0%, and the Dow falling 0.9%. The Global Dow fell 0.8% and the Russell 2000 dipped 0.3%. Strong employment data seems to support the Fed’s plan to raise the federal funds rate quickly to help fight inflation, leaving investors to fret about the impact on economic growth.
Market Month: May 2022
The Markets (as of market close May 31, 2022)
May was a volatile month for Wall Street. Stocks began May where April ended, with losses. In fact, it wasn’t until the last week of May that stocks posted gains. Throughout the month, investors had to face the prospects of an economic slowdown impacted by accelerating inflation, rising interest rates, the ongoing war in Ukraine, and lukewarm corporate earnings reports. Despite suggestions from Federal Reserve Chair Jerome Powell that the central bank is not likely to raise interest rates by 75 basis points, stubbornly high inflation has set the Fed on a path of quantitative tightening and interest-rate advances that presents a risk to economic growth.
Market Week: May 31, 2022
The Markets (as of market close May 27, 2022)
Stocks closed higher last week, ending a seven-week slide. More upbeat corporate news and favorable economic data helped quell investor angst, at least temporarily. The S&P 500 posted its best week since November 2020 and is headed for a positive month in May. A few factors may have helped increase investor confidence. Several large retailers released quarterly earnings results that largely exceeded Wall Street estimates. The personal consumption expenditures price index (the Fed’s preferred inflation indicator) rose 0.2% in April after increasing 0.9% in March, signaling that inflationary pressures may be subsiding. In addition to the S&P 500, the Dow, the Nasdaq, and the Russell 2000 gained more than 6.0% by week’s end. Nevertheless, to put the latest drought into perspective, the S&P 500 and the Nasdaq hadn’t suffered seven consecutive weekly declines since the dot.com bubble burst in early 2000. And the Dow’s eight-week slide was the longest since 1932.
Market Week: May 23, 2022
The Markets (as of market close May 20, 2022)
In another volatile week of trading, stocks fell for the seventh consecutive week. A late-day surge last Friday kept the S&P 500 out of bear territory, but not enough to keep it out of the red for the week. Disappointing earnings and declining profits from some major retailers apparently caused concern that retailers will pass on higher input costs to customers. Federal Reserve Chair Jerome Powell added to the angst when he said that “some pain” may be involved in the fight to tame inflation. This was enough to prompt investors to pull away from stocks. By the end of last week, the Nasdaq, the Dow, and the S&P 500 all fell by 2.9% or more. Crude oil prices climbed higher, while the dollar slid lower. Ten-year Treasury yields fell 15 basis points as bond prices increased. Gold prices rose by nearly $37.00.
Market Week: May 16, 2022
The Markets (as of market close May 13, 2022)
Despite a late-week rally, stocks closed last week lower, extending the market’s streak of losses to six consecutive weeks. In what proved to be a very choppy week of trading, each of the benchmark indexes lost value, led by the Nasdaq, which is down over 24.0% so far this year. The large caps of the Dow and the S&P 500 are down 11.4% and 15.6%, respectively, in 2022. On the other hand, 10-year Treasury yields have risen over 140 basis points so far this year. Last week, crude oil prices ended relatively flat, while the dollar advanced marginally. Gold prices slid lower. Investors are still grappling with the economic impact of the Federal Reserve’s response to persistent inflation. In a sign that inflation is still running hot, two major inflation reports, the Producer Price Index and the Consumer Price Index (see below) showed annual increases of 11.0% and 8.3% through April.
Market Week: May 9, 2022
The Markets (as of market close May 6, 2022)
Stocks ended last week lower, marking the fifth consecutive week of losses. Despite suggestions from Federal Reserve Chair Jerome Powell that the central bank is not likely to raise interest rates by 75 basis points, stubbornly high inflation has set the Fed on a path of quantitative tightening and interest-rate advances that presents a risk to economic growth. April’s solid jobs numbers (see below) suggest employers may be inclined to keep raising wages in order to attract workers, adding to inflationary pressures. Once again, tech shares took the brunt of the sell off, with only energy shares and utility stocks posting gains. The Nasdaq and the Russell 2000 each fell more than 1.2% last week, while the S&P 500 extended its losing streak after slipping 0.2%. Treasury bond prices continued to drop, pushing yields higher. Crude oil prices advanced again last week on supply concerns fueled by the impending European Union sanctions on Russian oil.