The Week On Wall Street
A Friday rebound, triggered by a big tech company’s earnings beat and a strong jobs report, shaved much of the week’s accumulated losses. The Dow Jones Industrial Average fell 1.24%, while the Standard & Poor’s 500 lost 0.80%. The Nasdaq Composite Index was flat (+0.07%) for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.62%.
Stocks See-Saw
Renewed regional bank concerns weighed on investor sentiment last week, despite the rescue of a troubled bank before the start of the trading week. But worries were not isolated to regional banks. Secretary of the Treasury Janet Yellen commented that the federal government may hit its debt ceiling earlier than expected, heightened investor jitters over a potential technical default. The stock market also slipped in the wake of the latest rate hike decision by the Federal Open Market Committee (FOMC). Solid earnings from one mega-cap tech firm and a strong employment report steadied investors, resulting in a Friday bounce that ended a volatile week on a positive note.
Fed Hikes Rates
Amid concerns in the regional bank sector and tightening credit conditions, the Fed elected to increase interest rates by 0.25%, citing elevated inflation and robust job gains. Investors were more focused, however, on what the Fed signaled about its plans since the expected rate hike. The Fed indicated it may pause further rate hikes, suggesting that future decisions will be based on economic data and prevailing financial conditions. Following the announcement, interest rate traders assigned an 89% probability that rates would remain unchanged following the next meeting of the FOMC in June.
This Week: Key Economic Data
Wednesday: Consumer Price Index (CPI).
Thursday: Producer Price Index (PPI). Jobless Claims.
Friday: Consumer Sentiment.
This Week: Notable Companies Reporting Earnings
Monday: PayPal Holdings, Inc. (PYPL), Skyworks Solutions, Inc. (SWKS), KKR & Co., Inc. (KKR)
Tuesday: Air Products and Chemicals, Inc. (APD)
Wednesday: Occidental Petroleum Corporation (OXY), The Walt Disney Company (DIS)
Final Thoughts
I saw a tweet that said that the market is pricing in a 0% chance of a hike or a cut in June, and a 35% chance of a cut in July. That seems a bit aggressive, but if more banks fail between now and July, I guess it’s possible. Remember, I have posted the long-term chart of Fed funds several times and pointed out that Fed funds always spikes. There is no higher for longer. The Fed always hikes too much, breaks something, and then must backtrack. Every single time. The longest the Fed has ever been able to maintain rates at a high level was 2007, which lasted for about 6-9 months. So, the clock is ticking.
The other news of interest is the debt ceiling. Our elected, yes someone voted for them, officials in Washington should be ashamed. Never waste a crisis is their mantra. They always take us right to the brink before doing anything about anything. This appears to be the case here once again. Allowing the U.S. to default would be the biggest mistake this country could ever make, so I hope they’re not that dumb. I surmise there will be yet another 11th hour deal to keep things moving. If not, every single one of them should be voted out. Every. Single. One. The doesn’t seem like a bad idea even if they do come up with a deal. I suppose the alternative could be worse, but is it? A fresh start. One can dream, but I digress.
Sentiment is still negative which is most likely positive for stocks in the near term. The technical models I’ve reviewed lately are somewhat bullish which coupled with negative sentiment make me think the market will grind higher in the near term. Inflation data comes out this Wednesday and should reflect continued downward pressure. With the Fed being done, yes, they’re done, any cooler than expected number could send stocks into a frenzy. Of course, a hotter than expected number could do the same, but in the wrong direction. I doubt it though. The economy is cooling off. CPI data on Wednesday is the big news for the week barring another bank taking a dirt nap.
Stay tuned.
A Friday rebound, triggered by a big tech company’s earnings beat and a strong jobs report, shaved much of the week’s accumulated losses. The Dow Jones Industrial Average fell 1.24%, while the Standard & Poor’s 500 lost 0.80%. The Nasdaq Composite Index was flat (+0.07%) for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.62%.
Stocks See-Saw
Renewed regional bank concerns weighed on investor sentiment last week, despite the rescue of a troubled bank before the start of the trading week. But worries were not isolated to regional banks. Secretary of the Treasury Janet Yellen commented that the federal government may hit its debt ceiling earlier than expected, heightened investor jitters over a potential technical default. The stock market also slipped in the wake of the latest rate hike decision by the Federal Open Market Committee (FOMC). Solid earnings from one mega-cap tech firm and a strong employment report steadied investors, resulting in a Friday bounce that ended a volatile week on a positive note.
Fed Hikes Rates
Amid concerns in the regional bank sector and tightening credit conditions, the Fed elected to increase interest rates by 0.25%, citing elevated inflation and robust job gains. Investors were more focused, however, on what the Fed signaled about its plans since the expected rate hike. The Fed indicated it may pause further rate hikes, suggesting that future decisions will be based on economic data and prevailing financial conditions. Following the announcement, interest rate traders assigned an 89% probability that rates would remain unchanged following the next meeting of the FOMC in June.
This Week: Key Economic Data
Wednesday: Consumer Price Index (CPI).
Thursday: Producer Price Index (PPI). Jobless Claims.
Friday: Consumer Sentiment.
This Week: Notable Companies Reporting Earnings
Monday: PayPal Holdings, Inc. (PYPL), Skyworks Solutions, Inc. (SWKS), KKR & Co., Inc. (KKR)
Tuesday: Air Products and Chemicals, Inc. (APD)
Wednesday: Occidental Petroleum Corporation (OXY), The Walt Disney Company (DIS)
Final Thoughts
I saw a tweet that said that the market is pricing in a 0% chance of a hike or a cut in June, and a 35% chance of a cut in July. That seems a bit aggressive, but if more banks fail between now and July, I guess it’s possible. Remember, I have posted the long-term chart of Fed funds several times and pointed out that Fed funds always spikes. There is no higher for longer. The Fed always hikes too much, breaks something, and then must backtrack. Every single time. The longest the Fed has ever been able to maintain rates at a high level was 2007, which lasted for about 6-9 months. So, the clock is ticking.
The other news of interest is the debt ceiling. Our elected, yes someone voted for them, officials in Washington should be ashamed. Never waste a crisis is their mantra. They always take us right to the brink before doing anything about anything. This appears to be the case here once again. Allowing the U.S. to default would be the biggest mistake this country could ever make, so I hope they’re not that dumb. I surmise there will be yet another 11th hour deal to keep things moving. If not, every single one of them should be voted out. Every. Single. One. The doesn’t seem like a bad idea even if they do come up with a deal. I suppose the alternative could be worse, but is it? A fresh start. One can dream, but I digress.
Sentiment is still negative which is most likely positive for stocks in the near term. The technical models I’ve reviewed lately are somewhat bullish which coupled with negative sentiment make me think the market will grind higher in the near term. Inflation data comes out this Wednesday and should reflect continued downward pressure. With the Fed being done, yes, they’re done, any cooler than expected number could send stocks into a frenzy. Of course, a hotter than expected number could do the same, but in the wrong direction. I doubt it though. The economy is cooling off. CPI data on Wednesday is the big news for the week barring another bank taking a dirt nap.
Stay tuned.
