Hey folks, it will be a long Holiday Weekend for US Markets with Monday being the Juneteenth Holiday. Markets are in turmoil and where we go from here will depend upon a few key variables. Get my take this this week’s current market action.
WEEKLY SOUND BITES:
The major indexes finished sharply lower for a second consecutive week. The S&P 500 Index recorded its worst weekly decline since March 2020 and entered a bear market, ending the week nearly 24% below its January peak. Meanwhile, the percentage of S&P 500 members that were trading above their 50-day moving average sank below 5% during the week, the lowest level since pandemic fears battered shares more than two years ago. Every member of the S&P 500 was in negative territory at one point, something that hasn’t happened since at least 1996, while the NYSE advance/decline ratio was the most negative it has been since 2007.
The Fed’s policy committee announced on Wednesday afternoon that it was raising the federal funds rate by 75 bps to a target range of 1.50% to 1.75%, its highest level since early 2020. Several reports indicated that the housing sector was already feeling the impact of Fed tightening and the surge in mortgage rates: Building permits fell 7% in May to their lowest level since last September, while housing starts sank 14.4%, the biggest drop since the onset of the pandemic. Weekly jobless claims also came in higher than expected (229,000 versus roughly 210,000), and a surprise contraction in Mid-Atlantic factory activity—the first since May 2020—mirrored a contraction and weaker-than-expected reading in the New York region reported earlier in the week. Retail sales data, reported Wednesday, further stoked recession fears. Overall sales fell 0.3% in May, dragged lower by a sharp decline in auto purchases, which partly reflected higher rates on car loans.
Inflation and rate fears pushed the yield on the benchmark 10-year Treasury note briefly to 3.49% on Tuesday, its highest level in more than a decade ending the week at 3.24%. High yield bonds experienced weakness, with riskier market segments underperforming and a pickup in outflows industrywide.
The ECB Governing Council held an unscheduled meeting after a jump in borrowing costs for some heavily indebted member states stoked fears of another eurozone debt crisis. The Swiss National Bank unexpectedly raised interest rates for the first time in 15 years, by half a point to -0.25%, to subdue inflation. In addition, the BOE raised its key interest rate to 1.25%, an increase of 25 basis points. Three of the nine policymakers voted for a 50-basis-point increase. Official data showed that the UK economy unexpectedly shrank 0.3% in April, after contracting 0.1% in March.
Continuing its divergence from global peers, the Bank of Japan (BoJ) maintained its ultralow interest rates. At its June monetary policy meeting, the BoJ kept overnight interest rates at minus 0.1% and said it would conduct daily purchases of 10-year JGBs at a yield of 0.25%.
Chinese stock markets advanced on hopes that a pickup in fixed asset investments would put the country’s economy back on track. China’s labor market showed signs of weakness. The unemployment rate in 31 major cities rose to a record high of 6.9%, while the youth jobless rate rose to a record 18.4%.
Enjoy This Week’s Market Round-Up;
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