Hey Folks, another down week in the markets helps move indexes lower as records continue to be set. Get my take on where to from here in this Week’s Round-Up.
WEEKLY SOUND BITES:
The major indexes recorded another week of losses, as investors appeared to grow increasingly skeptical that the Federal Reserve will be able to achieve a “soft landing” for the economy by raising rates enough to tame inflation without causing a recession. It marked the sixth consecutive weekly decline for both the S&P and Nasdaq and the seventh for the Dow—the longest stretch for the latter since 2001. There is still plenty to worry about such as the Fed’s accelerated pace of monetary tightening, persistently high inflation data, worries about slowing growth, disruptions caused by China’s strict COVID-19 lockdowns, and Russia’s invasion of Ukraine.
CPI data fell back a bit from March, rising 8.3% year over year versus consensus estimates of around 8.1%; likewise, core consumer inflation (excluding food and energy) pulled back less than expected to 6.2% versus 6.0%. Core producer prices rose a bit less than expected in April, but March’s monthly gain was revised higher to a record 1.2%. Consumer sentiment in May, released Friday, indicated the steep toll that inflation was taking on Americans’ confidence as the gauge fell much more than expected (to 59.1 versus consensus estimates of roughly 64) and hit its lowest level in 13 years. Survey respondents reported the worst conditions for buying appliances and other durable goods since researchers began asking the question in 1978.
The smaller-than-expected decline in consumer inflation caused a brief jump in the yield of the benchmark 10-year U.S. Treasury note on Wednesday, but it ended sharply lower for the week as a whole and fell back below 3.0%.
European Central Bank (ECB) President Christine “Queen Bee” Lagarde said their bond-buying program could end “early in the third quarter” and be followed by a rate increase “only a few weeks” later. Meanwhile, in the U.K. GDP unexpectedly contracted 0.1% in March, after stagnating in February, due mainly to a decline in service sector activity. The economy grew 0.8% in the first quarter, but this was below the 1.0% expected by economists and the 1.3% expansion that occurred in the fourth quarter of last year. Finland is expected to formally announce its decision to join NATO on Sunday along with Sweden which could cause more friction in Eastern Europe.
Against the backdrop of monetary accommodation being reduced in the U.S. and Europe, the Bank of Japan (BoJ) reiterated the central bank’s commitment to its current monetary policy stance with more3 stimulus spending as necessary.
Chinese stocks rallied as a fall in coronavirus cases and reassuring comments from the securities regulator lifted investor sentiment. On the inflation front, factory gate inflation jumped a higher-than-expected 8% in April following the previous month’s 8.3% increase.
Enjoy this Week’s Round-Up
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