Stock prices fell last week in response to the Fed’s plan to combat inflation, which staked out a more aggressive stance than investors had anticipated. The Dow Jones Industrial Average slipped 0.28%, while the Standard & Poor’s 500 fell 1.27%. The Nasdaq Composite index dropped 3.86% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slid 2.05%.
After a positive start to the week, stock prices turned lower on a more hawkish tone from Fed officials. On Tuesday, investors were surprised by comments from Fed governor Lael Brainard, one of the Fed’s more dovish members, who suggested the Fed could take a more aggressive approach with interest rates. The unease extended into Wednesday when minutes of the last Federal Open Market Committee (FOMC) meeting were released, signaling a potentially faster pace in both interest rate hikes and the wind-down of the Fed’s balance sheet. Yields climbed steadily throughout the week as the bond market digested this new information. Particularly hard hit were high valuation stocks, as reflected in the 4% drop in the Nasdaq.
After raising the federal funds rate by 0.25% last month, the minutes from the March FOMC meeting made it clear the Fed is serious about fighting inflation with higher interest rates. Fed officials indicated they might have hiked rates by a half percentage point in March had it not been for the uncertainty created by the invasion of Ukraine. Multiple Fed officials suggested that future rate hikes may reach 0.5%. Fed officials also discussed allowing up to a $95 billion monthly run off the Fed’s balance sheet, a faster pace than the market expected.
Tuesday: Consumer Price Index (CPI). Wednesday: Producer Price Index (PPI). Thursday: Jobless Claims. Retail Sales. Consumer Sentiment. Friday: Industrial Production.
Tuesday: CarMax, Inc. (KMX), Albertsons Companies, Inc. (ACI). Wednesday: JPMorgan Chase & Co. (JPM), Delta Air Lines, Inc. (DAL), BlackRock, Inc. (BLK). Thursday: UnitedHealth Group (UNH), The Goldman Sachs Group, Inc. (GS), Wells Fargo & Co. (WFC), Morgan Stanley (MS), The PNC Financial Services Group, Inc. (PNC).
This is a holiday shortened week with few companies reporting earnings. The market will trade on news and sentiment. Earnings season will begin to pick up next week and we will start to get more facts. Until then, the market continues to worry about inflation, rising interest rates and Russia. Negative sentiment prevails for the moment. Our quarterly update is in the works and should go out later this week via snail mail and next Monday via email. Have a good week and may Easter blessings find you.
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THIS WEEK'S UPDATE
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April 11, 2022
