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Stocks Snap Three-Week Losing Streak, Regain Footing

Market Data as of Week Ending: 06/24/2022 unless noted otherwise

Equities

U.S. stock prices snapped their three-week losing streak as major indices regained their footing after entering bear market territory. The S&P 500 gained 6.46% on the week as investors brushed aside lingering recession concerns and Fed Chair Powell’s hawkish Congressional testimony matched market expectations. Growth stocks continued their outperformance, outgaining value, and larger companies generally outperformed their small company peers. Nearly every sector in the S&P 500 recorded strong gains with consumer discretionary and health care leading the way. The energy sector was the exception, returning -1.55%, as oil prices fell on weak economic data and demand concerns. Developed foreign and emerging market stocks advanced but lagged the U.S.

Bonds

U.S. Treasury yields fell for the second consecutive week on the back of Fed Chair Powell’s comments and weaker-than-expected economic readings. The 10-year U.S. Treasury fell to 3.14%. Returns were mixed across the quality spectrum as longer duration high yield bonds were the best performing segment. Yields on investment grade corporate bonds and high yield corporate bonds moved slightly lower, finishing the week at 4.7% and 8.4%, respectively.

Macroeconomic Data

Economic data releases were largely disappointing in what was a relatively light week. Existing home sales fell 3.4% to a seasonally adjusted annual rate of 5.41 million in May, marking the fourth straight monthly decline. U.S. businesses suffered a sharp decline in June as high inflation has reduced demand. The S&P U.S. services index declined to a five-month low of 51.6 while the U.S. manufacturing index closed in on a two-year low of 52.4 in June. The final U.S. consumer sentiment index was revised unexpectantly to an all-time low of 50 in June as persistent inflation and record high gas prices have weighed on consumers. The 1-year U.S. inflation forecast was revised lower to 5.3% from 5.4%. U.K. inflation rose to a record 9.1% in May as food costs rose at the fastest rate in 13 years.

 

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Fears of Hard Landing Send S&P 500 into Bear Market Territory

Market Data as of Week Ending: 06/17/2022 unless noted otherwise

Equities

U.S. stock prices continued their downward trajectory as persistent inflation, central bank tightening, and higher yields sent markets lower. The S&P 500 officially entered bear market territory after recording its worst week since March 2020, returning -5.75%. The percentage of S&P 500 companies trading above their 50-day moving average fell below 5% last week, the lowest level since the beginning of the pandemic. In a reversal from last week, growth stocks held up better than value and larger companies generally outperformed their small company peers. All eleven S&P 500 sectors were solidly lower, with most declining between 4 to 6%. The energy sector was the worst performer, returning -17.10%, as oil prices experienced volatility on the back of supply concerns. Developed foreign and emerging market stocks narrowly outperformed the U.S.

Bonds

U.S. Treasury yields had a choppy week, briefly touching multi-year highs before a relief rally sent the 10-year treasury yield down to 3.23%. Higher-quality government bonds outperformed while shorter durations were able to provide value. Yields on investment grade corporate bonds and high yield corporate bonds were sent higher, finishing the week at 4.8% and 8.5%, respectively.

Macroeconomic Data

Economic data releases were relatively sluggish as the Federal Reserve’s rate decision loomed large. The NFIB small-business index was unchanged in May at 93.1 as expectations for future business conditions continued to deteriorate amid persisting inflation. U.S. retail sales fell for the first time in five months, declining 0.3% in May due to fewer auto purchases. The NAHM home builders index declined for the sixth month in a row and to a two year low of 67, reflecting growing pessimism as interest and mortgage rates climb. The Federal Reserve announced a 0.75% rate hike, the largest in three decades, as the Fed continues to be aggressive in combating inflation. The Philadelphia manufacturing index contracted for the first time since May 2020, falling to -3.3 in June from 2.6. The Bank of England raised its key interest rate by 0.25%, the fifth meeting in a row in which the BOE rose rates, as inflation recently reached 9.0% in the U.K.

 

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Markets Move Lower as Investors Grapple with Higher Inflation and Record Low Sentiment

Market Data as of Week Ending: 06/10/2022 unless noted otherwise

Equities

U.S. stock prices recorded another week of solid losses despite some early-week strength as market volatility continued. The S&P 500 returned -5.04% as markets turned south Thursday afternoon and into Friday as investors grappled with a hotter-than-expected inflation reading and upcoming monetary tightening in Europe. Value stocks were able to hold up better than growth and smaller companies generally outperformed their large company peers. The energy sector led the way again, posting only a minor loss on the week as oil prices climbed most of the week. Traditionally defensive sectors, consumer staples and health care, outperformed while financials, information technology, and consumer discretionary lagged. Developed foreign and emerging market stocks outperformed the U.S.

Bonds

U.S. Treasury yields increased as the price of government bonds decreased after Friday’s inflation reading, sending the 10-year treasury yield 0.22% higher to 3.16%. Higher-quality government bonds outperformed while credit sensitive bonds lagged. Among high quality investment grade bonds, those with shorter durations generally outperformed. Yields on investment grade corporate bonds and high yield corporate bonds jumped higher, and finished the week at 4.6% and 7.8%, respectively.

Macroeconomic Data

Economic data releases were sparse this week and were headlined by a hotter-than-expected consumer price index (CPI) reading. Rising rents, gas and food pushed May’s CPI up by 1.0%, bringing the year-over-year inflation rate to 8.6%, the highest reading in 40 years. The U.S. consumer credit rose to $38.1 billion, above consensus estimates and the third straight month of gains in consumer borrowing above $30 billion. U.S. unemployment claims increased by 27,000 to a five-month high of 229,000 during the first week of June, but appears to be linked to Memorial Day hiring. Consumer sentiment fell to a record low of 50.2 in the University of Michigan’s preliminary June reading as rising costs and expected monetary tightening has weighed on consumers. Japan’s government and central bank expressed concern as the sharp decline of the Yen has brought it to its lowest level in two decades versus the U.S. dollar.

 

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Stock Prices Decline on Investor Skepticism

Market Data as of Week Ending: 06/03/2022 unless noted otherwise

Equities

U.S. stock prices declined as investor sentiment shifted back toward skepticism around the Fed’s ability to restrain inflation. Now that the first quarter reporting cycle
has effectively ended, analyst expectations for the second quarter have come into focus. S&P 500 earnings are expected to grow by 4% for the second quarter
despite a nearly 10% growth in revenue. Growth stocks were able to outpace value and smaller companies generally outperformed their large company peers. It was
another solid week for the energy sector, one of only three sectors that delivered gains. Consumer discretionary and industrials were the other two sectors that edged
out a small gain while health care, real estate, and financials lagged. Developed foreign and emerging market stocks underperformed the U.S.

Bonds

Volatility picked up in the bond market as the 10-year treasury yield increased 0.20% and ended the week at 2.94%. Credit sensitive bonds outperformed while higherquality
government bonds lagged. Among high quality investment grade bonds, those with shorter durations generally outperformed. Yields on investment grade
corporate bonds and high yield corporate bonds narrowly edged higher, and finished the week at 4.3% and 7.3%, respectively.

Macroeconomic Data

Economic data releases were sparse this week and were headlined by a better-than-expected jobs report for the month of May. The U.S. added 390,000 jobs and the
unemployment rate remained unchanged at 3.6%. Job openings decreased from 11.9 million to 11.4 million. Those figures are aligned with Fed expectations given
tighter financial market conditions and recent interest rate hikes to help offset inflation. ISM reported that the manufacturing sector grew for the 24th consecutive
month in their PMI survey that increased to 56.1%. According to ISM, growth in the manufacturing sector remains challenged by excess demand in a supply-chain
constrained environment. Inflation in the European Union soared and reached a record high of 8.1%, putting more pressure on the ECB to begin raising short-term
interest rates.

 

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