In this week’s recap: The Fed signals more aggressive action on interest rates.
THE WEEK ON WALL STREET
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%.1,2,3
FED ROILS MARKETS
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.4
Tip of the Week
While well-meaning friends and family members may offer “advice” about your personal finances, remember that they may lack the education and perspective of a financial services professional.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Consumer Price Index (CPI).
Wednesday: Producer Price Index (PPI).
Thursday: Jobless Claims. Retail Sales. Consumer Sentiment.
Friday: Industrial Production.
Source: Econoday, April 8, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
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).
Source: Zacks, April 8, 2022Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice
The Weekly Riddle
When you take away the whole from this, you still have some leftover. What is it?
LAST WEEK’S RIDDLE: What do a shark, a zipper, and a comb all have in common?
ANSWER: They all have teeth.
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
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1. The Wall Street Journal, April 8, 2022
2. The Wall Street Journal, April 8, 2022
3. The Wall Street Journal, April 8, 2022
4. CNBC, April 6, 2022