THE WEEK ON WALL STREET
Stocks posted solid gains for the week, buoyed by the release of Fed meeting
minutes and upbeat earnings from mid-size and discount retailers. The Dow Jones
Industrial Average jumped 6.24%, while the Standard & Poor’s 500 advanced 6.58%.
The Nasdaq Composite index gained 6.84% for the week. The MSCI EAFE index,
which tracks developed overseas stock markets, rose 2.09%.
A GOOD WEEK
The stock market staged a broad rally last week, ignited by the release of minutes from
the May’s Federal Open Market Committee (FOMC) meeting. The meeting notes eased
concerns that the Fed might pursue a more aggressive monetary tightening stance than
the Street had anticipated. Investor sentiment rose owing to solid earnings and
encouraging guidance from several mid-size and discount retailers, which eased concerns
about the health of the American consumer. A smaller rise in the personal consumption
expenditures price index, the Fed’s preferred measure of inflation, triggered a strong rally
on Friday. The powerful move ended seven straight weeks of stock losses.
The minutes from May’s FOMC meeting were released last week. They confirmed the
likelihood of at least two successive 50 basis point interest rate hikes. The minutes also
indicated they might need to raise rates to a level that acts to restrict economic growth,
something that Fed Chair Jerome Powell acknowledged might be a painful process. Not
all Fed members are fully committed to the more aggressive rate hikes. Last week, Atlanta
Fed president Raphael Bostic wrote that a pause in rate increases in September might be
appropriate. He joined other members in suggesting that economic conditions may warrant
reconsideration of additional rate hikes beyond those already signaled by Powell.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Consumer Confidence.
Wednesday: Institute for Supply Management (ISM) Manufacturing Index. Jobs Openings
and Labor Turnover Survey (JOLTS).
Thursday: Automated Data Processing (ADP) Employment Report. Jobless Claims. Factory
Friday: Employment Situation. Institute for Supply Management (ISM) Services Index.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Tuesday: Salesforce, Inc. (CRM), HP, Inc. (HPQ).
Wednesday: MongoDB, Inc. (MDB).
Thursday: Broadcom, Inc. (AVGO), Hormel Foods Corporation (HRL), DocuSign (DOCU),
Going into last week stocks were very oversold. A little bounce was inevitable. The fundamentals
behind the bounce were inflation and interest rates. Data supporting the idea that we may be at
peak inflation got markets excited that rates may not need to go as high as once thought to slow
the economy. The facts… the jury is still out and we’ll need more than a week’s worth of data to
identify a trend, but it’s a start and we’ll take it. Inflation will be a hot topic as we ready for
mid-term elections. But, don't think the government will waste a crisis. There'll be much political
posturing and grandstanding and promises made. And, like most government action it will be
reactive and behind the curve and promises broken.